Tesla, the renowned U.S. electric vehicle maker, might soon establish its presence in India with the Indian government reportedly finalizing a policy that would offer Tesla reduced import duties for electric cars priced over ₹30 lakh (approximately $36,000). This concession, possibly lasting 2-3 years, is set to replace the initial plan of bank guarantees for Tesla’s proposed investment in an Indian electric vehicle factory.

What Happened? According to a report by the Economic Times, India’s current import duty structure is hefty, charging 100% on cars valued over $40,000 and 60% for those below. Tesla has shown interest in investing up to $2 billion, provided it gets a favourable import duty rate of 15% for the initial two years of its operation.

This move aligns with the Indian government’s aspirations to encourage foreign automakers to start local manufacturing, boosting employment and reducing electric vehicle prices through domestic production. The government’s strategy involves temporary duty reductions backed by bank guarantees. These guarantees are a safety net to ensure timely investments and local factory setups.

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The counter-charge: However, this potential leniency towards Tesla has prompted a cautious stance from Indian automakers. Although no formal objections have been raised, there’s an underlying concern about the competitive edge this might give Tesla, which hasn’t yet committed to a concrete investment plan in India.

Indian industry leaders, such as Mahindra & Mahindra’s Anish Shah, have expressed the need for equitable treatment. At the World Economic Forum in Davos, Shah emphasized the importance of foreign EV makers investing in India to avoid turning the country into just an importer. Indian companies like Tata Motors and M&M are already contributing to the local EV market, underscoring the potential for a robust and competitive domestic industry.

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