India’s federal government on Friday lowered import taxes on certain electric vehicles made by automakers under certain conditions, in a massive win for Elon Musk’s Tesla $TSLA.
The country's high taxes have been Tesla's main barrier to entry
India’s federal government on Friday lowered import taxes on certain electric vehicles made by automakers under certain conditions, in a massive win for Elon Musk’s Tesla $TSLA.
The government will require companies to commit to investing at least $500 million and begin domestic manufacturing within three years. In return, carmakers that meet those requirements will be allowed to import up to 8,000 EVs that cost $35,000 or more annually at a tax rate of 15%.
Under current regulations, India levies taxes of 70% or even 100% on imported EVs, depending on their value. Electric vehicle imports at the lower tax rate will be allowed for a maximum of five years.
Tesla has been lobbying New Delhi to lower import taxes on EVs for years, but local manufacturers have opposed any changes. Musk has frequently cited high import taxes as the main reason Tesla hasn’t done much business in the country, although he has repeatedly reaffirmed his interest.
“I am confident that Tesla will be in India and will do so as soon as humanly possible,” Musk told reporters last June after meeting with Indian Prime Minister Narendra Modi.
In July, a Tesla representatives reportedly discussed plans to build a factory that would make an all-new $24,000 EV. In return, Tesla wanted a cut in import taxes. The Austin, Texas-based EV maker’s cheapest vehicle, the Model 3, starts at $38,990 in the U.S.
India’s Ministry of Commerce and Industry said the new policy would have a slew of benefits, writing that it will “boost the Make in India initiative, strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, lower cost of production, reduce imports of crude Oil,” and several other effects.
VinFast, which briefly became the third-most valuable carmaker in the world last year, plans to build a $2 billion EV plant in India as it pushes to expand globally. The Vietnamese company has also reportedly lobbied India to reduce import duties on its cars for two years.
BYD, China’s largest EV maker and Tesla’s chief rival, has also expressed interest in India. The company proposed a joint venture with Indian firm Megha Engineering and Infrastructures last year, before it was shelved after Indian government officials raised concerns.
Tesla stock was largely flat Friday. Tesla stock has had a brutal start to 2024, losing more than 34%.
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