Dashing Tesla's hopes of a seamless India entry, the Centre informed Parliament that it has no plans to lower customs duty on imported electric vehicles. “No such proposal is under consideration in the Ministry of Heavy Industries,” junior minister Krishan Pal Gurjar told Parliament on Monday, referring to the ministry in charge of making policies for the auto industry.
The reply to lawmakers may be perceived as part of the tug-of-war between Prime Minister Narendra Modi’s administration, which wants to boost local manufacturing, and Tesla, which is urging India to allow it to import cars more cheaply before it commits to setting up a factory in the country.
The response comes in the backdrop of Tesla reportedly writing to the transport and industry ministries last month appealing to slash the import duty on vehicles, the highest in the world. Passenger four-wheelers imported into India are currently taxed at 60 per cent for vehicles costing below $40,000, or at 100 per cent for vehicles with prices above $40,000, irrespective of the fuel type. In a letter to the Indian authorities, Tesla had lobbied a reduction of the customs duty to 40 per cent for EVs.
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Replying to a tweet last month about launching its vehicles in India, Tesla’s CEO, Elon Musk, had even said, “We want to do so, but import duties are the highest in the world by far of any large country!” He further added, “Moreover, clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India.”
Many luxury vehicles have also lobbied the government in the past to lower taxes on imported cars but have had little success due to opposition from rivals with domestic operations.
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 had said.
While there were reports that the Indian government was considering Tesla's request, the latest update has dashed all hopes.
