The Indian government is considering a five-year tax reduction on imports of completely built units (CBUs) of electric vehicles (EVs), as reported by Bloomberg on November 14. People familiar with the matter state that the government is also contemplating allowing foreign automakers to import EVs at concessional duty rates if they commit to eventually building them in India. These preferential policies aim to attract investments from EV manufacturers, with a particular focus on Tesla [TSLA:US], which is establishing a closer relationship with India. On November 13, Indian Trade Minister Piyush Goyal visited Tesla’s factory in Fremont, California, disclosing that the company is set to double its imports of components from India.
Currently, India imposes duties ranging from 70% to 100% on vehicles imported as fully built units, depending on their import value. Tesla had sought lower taxes on the sales of imported EVs in India in 2021, hoping to reduce the rates to 40%. The company argued that high import levies would hinder sales, and reduced duties would contribute to the development of the Indian EV ecosystem. However, previous talks between Tesla and the Indian government reached a deadlock as officials insisted that Tesla should commit to local manufacturing first. Concerns were also raised about the potential disruption to the nascent EV market and the impact on domestic manufacturers if taxes on imported EVs were lowered. As part of its efforts to enter the Indian market, Tesla has recently expressed the intention to build a local factory for the production of a new economy-version EV priced around USD24,000.