Government Has Denied Tesla's Request For Tax Concessions

Elon Musk's Tesla Inc. requested tax reductions for importing electric cars, but India declined, claiming that rules already enable partially-built vehicles to be imported and assembled locally at a reduced rate.

Vivek Johri, Chairman of the Central Board of Indirect Taxes and Customs, said: “We looked at whether the duties need to be re-jigged, but some domestic production is happening and some investments have come in with the current tariff structure. So, it is clear that this is not a hindrance.”

Tesla has been urged to produce in India by Prime Minister Narendra Modi's administration. But Musk wants a decrease in import duties — which may be as high as 100 per cent on electric vehicles (EV)— so that the business can sell automobiles built elsewhere at competitive pricing first. It does, however, levy import tariffs of 15 to 30 per cent on parts delivered for assembly in the country.

Tesla has yet to offer a plan for local production and procurement from India, according to Johri. Meanwhile, after Musk revealed last month that the American EV maker pioneer was still encountering a lot of “challenges” with the central government, politicians from at least five states have urged Tesla to set up shop in their provinces.

India has requested Tesla to consider importing so-called knocked-down units or partially completed vehicles, which carry a lesser import charge.

The Indian rivals of Tesla, such as Mahindra and Tata Motors are investing in building local capacity for EVs and Johri believes that Musk’s company could follow the lead of these domestic players. According to him: “There are others importing completely built units. That route is open.”

Tesla will also face competition from Mercedes-Benz, which plans to launch an EQS in India by the fourth quarter of this year.

As per an analysis, in December 2021, over 90 per cent of the total sales were made up of battery-powered two-wheelers and passenger three-wheelers. Two-wheelers alone accounted for 48.6 per cent of all sales, almost half of the total, while electric cars made up only 5 per cent of the total.

Indian roads are still dominated by the cheap alternative of EV, petrol- and diesel-powered cars—such as four-wheelers manufactured by Hyundai Motor Co. and Suzuki Motor Corp. But industry experts believe that there is a massive possibility of tremendous growth in the EV sector.

Tesla previously stated its intention to enter India as early as 2019, but Musk claimed that local regulations prevent him to so. At that time, the billionaire said on Twitter: “I’m told import duties are extremely high (up to 100 per cent), even for electric cars. This would make our cars unaffordable.”

According to previous reports, Union Minister Nitin Gadkari last year said that he has asked Tesla to produce its renowned electric automobiles in India while pledging the firm of the government's full support.

“I have told Tesla that don't sell electric cars in India which your company has manufactured in China. You should manufacture electric cars in India, and also export cars from India. Whatever support you (Tesla) want, will be provided by our government," the Minister said.

But Tesla did not say anything about its plan. However, Johri argued that “Some investment has already come in with the current tariff structure. So why can’t others also come in? There are other foreign brands also which are being sold in the country with the current tariff structure.”