High import duty: India reconsidering policy after Musk's tweet; local EV makers concerned?

The Central government may consider lowering import duty and other incentives for Tesla, but on one condition--that the company sets up its manufacturing unit in India. If India, indeed, revamps its high import duties on automobiles, it will lead to Tesla opening its manufacturing centre in India as the company has already intimated that it may look to set up a factory in India if successful with imported vehicles.

"We will be open to consider, especially if they will set up a manufacturing place here," an ET report said, citing a Central government official who did not want to be identified. However, any decision on this count will be sector-specific and not for a particular company, which implies that the Central government might roll out incentives for electric vehicle manufacturing companies to set shop in India. It is to be noted that the Narendra Modi government has been unabatedly promoting clean energy and adoption of electric vehicles in the country.  

The report assumes significance as Tesla CEO Elon Musk recently tweeted that high import duties and a clean energy policy inconsistent with India's climate energy goals were delaying the car manufacturer's launch in India. 

Separately, the company had written to Indian ministries seeking a big reduction in import duties on electric vehicles. Hyundai MD S. S. Kim has also backed Tesla’s call for lower duties in India on imported EVs. Lowering duties will help grow the EV market, he said.

At the same time, India has been witnessing a lot of action in electric vehicle manufacturing, especially in the two-wheelers segment. Not surprisingly, the news of a sector-specific ease in high import duty for electric vehicles in India might be a bit unnerving for indigenous players. 

Ola Group CEO Bhavish Aggarwal has already voiced his disagreement. "Strongly disagree with both (Musk and Kim). Let’s have confidence in our ability to build indigenously and also attract global OEMs to build in India, not just import. We won’t be the first country to do so," he said. The comments come as Ola Electric is expected to roll out its electric scooter by the month-end.