22/02/2024
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“Navigating Tesla’s Roadblock: India’s Unexpected Stand on EV Import Taxes”

In a setback for Tesla, India has announced that it currently has no plans to reduce import taxes on electric vehicles (EVs). This unexpected development comes as a surprise, especially considering the government’s previous efforts to formulate a policy allowing international companies to import electric cars with concessional tax rates, contingent on their commitment to eventual manufacturing in India.

The government clarified its position, stating that there is presently no proposal for an exemption from local value addition costs or subsidies on import duties for electric vehicles in India. Som Parkash, the junior minister of the Ministry of Commerce and Industry, conveyed this information to parliament, potentially causing a delay in Tesla Inc.’s entry into the Indian market.

Mr.Parkash highlighted the government’s existing policies aligned with the ‘Make-in-India’ initiative, designed to encourage both domestic and foreign investment in the EV industry. The government had previously launched a $3.1 billion incentive program in 2021 to stimulate local EV production. Additionally, it introduced incentives under a $2 billion program for companies interested in building batteries within India.

This unexpected turn contrasts with earlier reports suggesting the government’s willingness to allow international companies to import electric cars at concessional tax rates if they commit to future manufacturing in the country. The potential ramifications include a potential deadlock in the ongoing talks between Tesla and the Indian government, reminiscent of their previous year-long impasse.

The prior impasse involved Prime Minister Narendra Modi’s administration urging Tesla to produce cars locally, while CEO Elon Musk sought lower taxes to initially sell vehicles manufactured elsewhere at competitive prices. Despite resumed dialogues and Musk’s announcement of a probable ‘significant investment’ during PM Modi’s US visit, these plans now face potential delays.

Earlier reports indicated that India and Tesla were nearing an agreement, involving the sale of the US automaker’s cars in the country from next year, coupled with the establishment of a factory within two years. However, the recent statement from the Trade Minister Piyush Goyal, who visited Tesla’s plant in California, revealed that Tesla plans to nearly double purchases of auto parts from India to $1.9 billion this year.

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