Tax Reduction on Ev’s, is it because of Tesla

Tesla, India

Two top government sources told us that India is discussing cutting import tariffs on electric automobiles to as low as 40 percent. The government is considering reducing the tax rate to 40% from 60% for imported electric vehicles with a worth of less than $40,000 (approx. 30 Lacs INR) and reducing the tax rate to 60% from 100% for imported vehicles with a worth more than $40,000 (approx. 30 Lacs INR). They haven’t finalised the duty reductions yet, but talks are currently in progress.

As reported by Press release in July, Tesla’s proposal to the government claimed that cutting import taxes on electric vehicles to 40 percent would make them cheaper and drive sales. An industry-wide discussion erupted, if such a decision would counter India’s efforts to promote local production. The government is looking very flexible to a reduction in Tesla’s tax rate if it can confirm that the company would boost the nation’s economy – by manufacturing domestically, for example, or by presenting a precise schedule on when it will be able to, according to government official. 

The reduction of import tariffs is not a concern because the country imports very few electric vehicles but there should be some sort of economic benefit from it and must take into consideration the interests of domestic players.

Mercedes and Hyundai Motor, which has an 18 percent share of India’s vehicle industry, have stepped up to support Tesla in this matter. Earlier, Mercedes-Benz and Audi, which are owned by Daimler, have campaigned for lower import tariffs on luxury automobiles for years, but have been met with significant pushback from domestic firms. Thus, the Indian market for high-end luxury automobiles continues to be very modest, with an average annual sales volume of approximately 35,000 units. India’s Tata Motors and Softbank Group-owned Ola, who manufactures electric affordable electric vehicles in India, are amongst the opposing group. 

The government has acknowledged that a company like Tesla may help make electric cars more appealing in India which is lagging behind EV sales and that’s why government is figuring out the best way to tackle it.

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