Tesla Model S (Representative image)
A day after Elon Musk tweeted about India’s high import duties on Tesla cars, senior government officials have categorically ruled out any possibility granting it any company-specific incentives.
Citing clear guidance from the highest political office of the country against separate incentives for companies, the officials told Moneycontrol that even sectoral incentives should favour domestic manufacturers. They also strongly hinted that the government is not in favour of lowering import duties on completely built-up foreign cars.
On July 24, Tesla CEO Musk responded to a post by an Indian Twitter user by saying that high import rates were pushing back the entry of the e-vehicle maker in the country. Musk’s tweet came days after Reuters reported that the company had heavily lobbied the government for reducing import duties on electric vehicles.
“The government has made its stance against company-specific incentives clear. This also applies for one particular company requesting industrywide changes to existing policy. Over the past four years, multiple demands were made by a large US-based firm to open up the market at lower import duties as well. Now, they locally produce in India and are ramping up capacity,” one official said.
The official was hinting at Cupertino, California-based Apple, which had pitched for market access for its products and special concessions to begin manufacturing in India. It now produces at least four mobile phone models in India through contract manufacturers Winstron in Karnataka and Foxconn in Tamil Nadu.
Musk tweeted that India’s import duties treat clean energy vehicles the same as diesel or petrol, which is inconsistent with the country’s climate goals. Tesla is set to begin sales in India by 2021-end by importing fully completely built models of its cars from China.
Duty dilemma
India currently charges 60 percent import duty on completely built-up cars costing less than $40,000 (Rs 29.7 lakh) and 100 percent import duty on those costing more than $40,000. Along with additional cesses, the price rises further.
While the prices of Tesla models in India have not been revealed, they are expected to be above the $40,000 limit. Only the Model 3 Standard Range Plus is priced below that figure in the US.
The officials hinted that the government is not looking to cut import duties on ‘ultra-premium’ products anytime soon. Musk had tweeted that he was “hopeful for at least temporary tariff relief.”
“The commerce department has consistently suggested higher import duties for finished products rather than components to support Make in India. Our commitment remains with that,” a senior department official said.
Import duties on completely built-up cars have remained higher, especially for luxury cars, despite grumblings from companies other than EV makers over the past few years. An additional goods and services tax cess on luxury vehicles with engine power above 1,500 cc has also stayed in place despite opposition.
Domestic manufacturing
Musk’s enthusiasm at manufacturing Tesla cars in India has been lower.
“If Tesla is able to succeed with imported vehicles, then a factory in India is quite likely,” he tweeted on July 24.
But arguing that domestic electric vehicle companies have consistently sunk in funds to research and build in India, officials said foreign manufacturers can take advantage of production-linked incentive schemes for the automotive sector, including one for advanced chemistry cells for EVs.
“The company has been apprised of the details of India’s PLI scheme for automotive manufacturing. It has been pointed out that locally sourcing and manufacturing cars would lower the environmental impact of the production process,” a senior NITI Aayog official said.
While domestic production and sales of EVs remain at a nascent stage as of now, the sector has received huge attention. NITI Aayog’s vision 2030 for the sector envisages a complete transition to EVs by that year.
In 2021, local companies such as Ather Energy and Ola Electric have announced plans to ramp up manufacturing capacity while several state government industrial departments have announced a policy push towards electric mobility.
The India Energy Storage Alliance projects that the Indian EV market will grow at a CAGR of 36 percent till 2026, reaching over 6.3 million units. According to the CEEW Centre for Energy Finance, the EV market in India will reach $206 billion by 2030.
