Imported electric cars may become cheaper in India as the government is considering slashing duties, according to media reports.
This will be a departure from the Indian government’s earlier policy of imposing high import taxes to boost local manufacturing. This norm is being followed across many industries.
At present, imported electric vehicles that cost less than US$40,0000, including the car’s cost, insurance and freight, attract a duty of 60% and the government is reportedly planning to bring it down to 40%. For electric vehicles valued at more than $40,000, the import duty is 100%, and that may be reduced to 60%.
Elon Musk who heads the American electric car giant Tesla has been appealing to the Indian government to slash import duties on electric vehicles to 40% to make them attractive in the price-sensitive Indian market.
The majority of cars sold in the Indian market are priced below $20,000 and the average annual sales figures for luxury cars is about 35,000.
Tesla wants to initially sell imported wholly-built units of its electric vehicles in India and later set up a local factory. It now has only one “gigafactory” in Asia, in Shanghai, China.
On January 8 this year it registered in Bangalore as Tesla India Motors and Energy to set up a research and development unit. Bangalore is also a hub for home-grown electric vehicle startups such as Ola Mobility, Ather Energy, Mahindra Electric as well as units of Toyota, Daimler and Bosch.
Musk has been in touch with Indians on social media and recently tweeted that he was keen to launch Tesla cars in India, but import duties on electric vehicles were on the higher side.
He tweeted: “We want to do so, but import duties are the highest in the world by far of any large country! Moreover, clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India.”
Tesla’s demands have found support from Mercedes-Benz, which had launched its electric car EQC in India in October 2020 and is satisfied by the customer response. The German auto giant also plans to bring the next batch of EQCs to India next month.
South Korean automaker Hyundai Motor, which enjoys an 18% share of India’s car market, has also supported the move. It sells Kona electric vehicles, but the sales have been lackluster. It is priced at almost 2.4 million rupees and in July had sold only 23 units.
However, Tata Motors and Ola, which make electric scooters in India, have opposed the proposal. Tata’s Nexon EV is priced at nearly one million rupees less than Kona and leads the electric car market.
Krishan Pal Gurjar, a junior minister in the Narendra Modi cabinet, told the parliament there is no proposal under consideration in the Ministry of Heavy Industries, which frames policies for the auto industry. The government will promote the use of electric cars by lowering domestic taxes and adding charging stations, he added.