Govt Turns Down Tesla's Demand For Tax Breaks

India has asked Tesla to consider importing so-called knocked-down units or partially built vehicles, which attract a lower import levy, instead of fully-built units

New Delhi: The central government is no mood to give tax breaks to Elon Musk’s Tesla Inc.

The Centre has again turned down a demand of Tesla for tax breaks to import electric cars, saying rules already allow bringing in partially-built vehicles and assembling them locally at a lower levy.

Quoting Vivek Johri, chairman of the Central Board of Indirect Taxes and Customs, Bloomberg reported, “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.”

Prime Minister Narendra Modi’s administration has encouraged Tesla to produce locally, while Musk wants India to lower taxes, as high as 100 per cent on imported electric vehicles, to enable the company to first sell cars built elsewhere at competitive prices.

Tesla is desperate to import and sell its electric vehicles in India and has for nearly a year lobbied officials in New Delhi to reduce tariffs, which the company’s billionaire CEO Elon Musk says are among the highest in the world.

But Indian official sources said they have been unconvinced by Tesla’s lobbying as the company has not yet shared any firm plan to invest in the country, something that would be in line with Prime Minister Narendra Modi's ‘Make in India’ vision to boost local manufacturing and create jobs.

According to Johri, Tesla has yet to present a plan for local manufacturing and procurement from India, even after the government asked for it. The Union Budget didn’t mention any tax breaks for cleaner but imported vehicles, even though Maharashtra publicly backed Tesla’s demands.

India has asked Tesla to consider importing so-called knocked-down units or partially built vehicles, which attract a lower import levy, instead of fully-built units.

Tesla should follow the lead of domestic companies like Mahindra & Mahindra and Tata Motors which are investing in building local capacity for electric vehicles, Johri said, while adding that “There are others importing completely built units. That route is open.”

Tesla is also up against the likes of Mercedes-Benz, which will roll out a locally assembled EQS, the electric version of its flagship S-Class sedan, in India by the fourth quarter of this year. As of now, electric vehicles accounting for less than 1 per cent of total sales in India.