India Considers Five-Year Tax Cuts on EV Imports to Entice Tesla

News Highlights

• Electric vehicles accounted for just 1.3 percent of the total passenger vehicles sold in the previous year.
• Setting up a new EV facility in the country could increase the adoption of better and cleaner transportation in India.

India plans to reduce taxes on the imports of completely built units (CBU) of EVs in the country. The government is trying to pursue Tesla by reducing tax cuts on the imports of electric vehicles for five years. And is diligently working on an electric vehicle policy so that international car manufacturers will produce and sell their cars in the country. 

Under this policy, global auto manufacturers will be able to import battery-powered vehicles with less tax imposition if they decide to build these vehicles in India. Manufacturers who are planning to set up facilities in India will greatly benefit from this new policy. A final decision on the new electric vehicle policy is yet to be taken by the government. Back in 2021, the Austin-based electric vehicle manufacturer sought duty cuts on the import of EVs in India. The manufacturer was hoping to have 40% reduced rates in the range of 70%–100%; the rates also depend on their import value.

Read more: India to Expedite Required Approvals for Elon Musk’s Tesla Investment in India

The Indian Trade Minister, Piyush Goyal, is currently in San Francisco to attend the ministerial meetings of the Asia-Pacific Economic Cooperation and Indo-Pacific Economic Framework. The Chief Executive Officer of Tesla, Elon Musk, could meet Piyush Goyal in the upcoming weeks to talk about Tesla’s proposal to set up a facility in the South Asian nation.

India is the world’s most rapidly growing automotive market. The demand for EVs is increasing among India’s burgeoning middle class. Tesla has shown interest in being a part of the Indian market by setting up its manufacturing facilities in the country. India will benefit from Tesla’s investment as it will help the government increase the share of manufacturing in India’s GDP and will also aid in creating more job opportunities for people.

The electric car market in India is still in its developing stage. Electric vehicles accounted for just 1.3 percent of the total passenger vehicles sold in the previous year. Only a few customers are opting for EVs because of their high cost and lack of charging stations. Also, a pool of other options is available on the market.

Setting up a new EV facility in the country could increase the adoption of better and cleaner transportation in India, which has the world’s most toxic air due to spiked pollution levels. The Indian government had also launched an incentive program worth $3.1 billion in 2021.