Centre On Verge Of Finalising Policy To Extend Tax Cuts To Tesla EVs: Report

Potential reduction in import duties could be contingent on Tesla providing bank guarantees for the establishment of an EV manufacturing plant in India

Months after expressing interest in venturing into the Indian market, Tesla, led by billionaire Elon Musk, is on the brink of entering the country. The Indian government is reportedly in the process of finalising a policy to extend concessional import duties, particularly for electric cars exceeding ₹30 lakhs ($36,000), for a duration of 2-3 years. This initiative aims to stimulate employment opportunities and reduce the prices of electric vehicles (EVs) within the country.

Moreover, sources suggest that the potential reduction in import duties could be contingent on Tesla providing bank guarantees for the establishment of an EV manufacturing plant in India, as per a report by the Economic Times.

While Tesla was expected to announce its entry into the Indian EV market during the Vibrant Gujarat 2024 summit, no definitive decisions had been made by the billionaire regarding the establishment of an electric vehicle plant in the state at that time.

Under the existing policy, cars valued at over $40,000 (Rs 33 lakhs) are subject to a 100 per cent import duty, while cars valued below this amount face a 60 per cent import duty.

Tesla has expressed its intent to enter the Indian electric vehicle (EV) market and commit up to $2 billion in investments, contingent upon the government reducing the import duty to 15 per cent for the initial two years of its operations. Consequently, the government is considering a reduction in concessional import duties for imported cars, with the policy contingent on the provision of bank guarantees. It's worth noting that these bank guarantees can be utilised if the company fails to adhere to the stipulated timeline for the specified investments.

Will This Be Bad News For Domestic EV Makers?

Presently, industry leaders such as Mahindra and Mahindra, Tata, and Ola Electric take the forefront in electric vehicle production in India. These companies consistently advocate for a fair competitive environment, expressing concerns about potential advantages that might favour Tesla.

Mahindra & Mahindra has engaged with government officials, emphasising the importance of creating a level playing field and encouraging increased domestic manufacturing. Ola CEO Bhavish Aggarwal shares a similar stance, opposing the importation of electric cars from foreign entities. Aggarwal contends that providing incentives to international players like Tesla could significantly impact the sales of domestic manufacturers.

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