Tesla's Elon Musk. Photo: AFP / Brendan Smialowski

Tesla chief Elon Musk’s India market plans have suffered a setback after an Indian minister ruled out any plan to cut import duties on electric vehicles.

Krishan Pal Gurjar, a junior minister in the Narendra Modi cabinet, told the Parliament on Monday that 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.

Tesla wants to initially sell imported wholly-built units of its electric vehicles in India and later set up a local factory. Musk has been appealing to the Indian government to slash import duties on electric vehicles to 40% from the current range of 60-100%. India levies 100% tax on the imported cars worth over $40,000, inclusive of cost, insurance, and freight, while those worth less than $40,000 invite 60% tax.

Musk has been in touch with Indians on social media and had 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.”

In another tweet, he said, “But we are hopeful that there will be at least a temporary tariff relief for electric vehicles. That would be much appreciated.”

Tesla’s pitch for lower duties is at variance with the Indian government’s policy of imposing high import taxes to boost local manufacturing. This policy is being followed across many industries.

The American carmaker was expected to start selling its vehicles in India by early 2021, but the plans have been delayed due to the high import duty hurdle. While Musk remains eager to tap the Indian market, the price of its vehicle coupled with high import duty would deter buyers.

The US electric car maker on January 8 this year registered in Bangalore as Tesla India Motors and Energy to set up a research and development unit. The then chief minister of Karnataka state B S Yediyurappa had also stated that Tesla will open its electric car manufacturing unit in the state. At present, Tesla has only one “gigafactory” in Asia, in Shanghai, China.

Bangalore is also home to global technology majors such as Infosys and Wipro and 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.

India is looking to boost electric mobility with the twin objective of reducing air pollution and cutting down on fossil fuel imports. Many of its cities, including the capital New Delhi, figure among the most polluted in the world, and vehicular emissions are one of the major reasons.

Many Indian carmakers have also firmed up plans to go electric. Tata Motors plans to launch 10 electric vehicle models by 2025. Tata Sons Chairman N Chandrasekaran has said that electric vehicles could constitute about 25% of the total passenger vehicle sales at Tata Motors “in the medium to long term.” At present they account for only 2% of the sales.

Luxury car brands Audi and Mercedes-Benz are also upbeat about the electric car market in India. Audi India has set a target of 15% of its total sales in the country to come from electric vehicles by 2025. Mercedes-Benz had launched its electric car EQC in India in October 2020 and is satisfied by the customer response. It plans to bring the next batch of EQCs to India next month.