- Monday, February 24, 2025
By: Shubham Ghosh
INDIA is thinking of slashing import duties on electric vehicles (EVs) to as low as 40 percent, two senior sources in the government have told Reuters, days after Tesla Inc’s request for a cut polarised the country’s auto industry.
According to the officials, the government is discussing lowering the tax rate to 40 per cent from the current 60 per cent for imported EVs with a value of less than $40,000, including their cost, insurance and freight, Reuters reported.
For EVs having a value of more than $40,000, the government is looking at slashing the rate to 60 per cent from 100 per cent, they added.
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“We haven’t firmed up the reduction in duties yet, but there are discussions that are ongoing,” one of the officials said.
India is the world’s fifth-largest car market with annual sales of about three million vehicles but the majority of those are priced below $20,000. EVs constitute a fraction of the total while luxury EV sales are negligible, as per industry estimates.
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Reuters reported in July that Tesla argued that if the government lowered the import duties on EVs to 40 per cent, it would make it more affordable and boost sales. This led to a public debate among the automakers whether such a move would be against India’s push to bolster domestic manufacturing.
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“Reducing import duties is not a problem as not many EVs are imported in the country. But we need some economic gain out of that. We also have to balance the concerns of the domestic players,” one of the officials said.
Tesla chief executive Elon Musk said on Twitter last month that the company could have a local factory in India if the company was successful with vehicle imports but taxes on them are high.
The other official said that since the duty cut is under consideration only for EVs and not other categories of imported vehicles, the domestic automakers should not be concerned since they mainly make gasoline-powered cars.
The official added that India’s commerce and finance ministers and the federal public policy think-tank Niti Aayog, chaired by prime minister Narendra Modi, are discussing the proposal and all stakeholders will be spoken to.
Other luxury automakers like Daimler’s Mercedes-Benz and Audi have lobbied for lower import duties for years but faced strong resistance from the domestic companies. The result has been a smaller luxury car-market in India with average sales of around 35,000 vehicles a year.
Tesla’s vehicles would fall into the high-end EV category as well. They are mainly imported into India and account for a much smaller percentage for sales.
Tata Motors, one of the major automakers in India that make affordable EVs, have opposed the proposed cut along with Softbank Group-backed Ola, which is making electric scooters.
Another source close to the government’s thinking told Reuters that there was awareness that a brand like Tesla could make EVs more penetrable in India, which witnesses a low EV sales.
The government is also thinking about the best way to handle this and it wants to see some benefits, even if that means Tesla pledging to source parts domestically, the official said.
