India ‘Considering’ Tesla Tax Deal To Open Domestic EV Market

The Indian government is reportedly considering a deal with Tesla that could see it offering lower import tax rates in exchange for the company building a domestic manufacturing facility.

The policy could apply to other electric vehicle makers as well, giving them greater access to India’s small but fast-growing electric vehicle sector if they commit to some degree of domestic production, Reuters reported, citing an unnamd official.

A possible option could allow car firms to import fully built EVs at a tax rate as low as 15 percent, compared to 100 percent now, for vehicles priced at over $40,000 (£31,800) and 70 percent for lower-priced models.

The lower rate would, for instance, apply to Tesla’s Model Y, which starts at $47,740 in the US before tax credits.

‘Understanding’

Such a deal would mean Tesla could sell its full range of cars in India with lower duties, in addition to a lower-priced model it is considering building in the country.

Reuters cited the official as saying there was “an understanding” around the proposal, which was initially made by Tesla, and that the government was “showing interest”.

Finance Minister Nirmala Sitharaman told reporters there was “no proposal in front of me” to reduce EV import duties, and Reuters’ source said the policy was at an early stage of deliberation.

India’s car market is the world’s third biggest, with a share of EVs that stands at only 2 percent but is growing quickly.

Any change in import taxes would mean increased competition for domestic car producers such as Tata Motors – the parent company of Jaguar Land Rover – and Mahindra and Mahindra, which are both investing in domestic EV production.

International expansion

Indonesia has previously offered to reduce import taxes from 50 percent to zero for EV makers who plan domestic investments, a move considered to be aimed at luring Chinese manufacturers aned Tesla.

Tesla chief executive Elon Musk met with Indian prime minister Narendra Modi in New York City in June and has said he is planning to visit India next year.

Outside the US Tesla has a factory in Shanghai and another near Berlin, and is building one in Mexico to produce a new mass-market EV platform.