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India Considers Slashing Import Duties to Attract Tesla EV Manufacturing

Updated: Jan 8

India is working on a new electric vehicle policy that would slash import taxes for automakers committing to some local manufacturing, following a proposal by Tesla which is considering entering the domestic market, people with direct knowledge said.

Elon Muskand India's Prime Minister Narendra Modi
Credits: Reuters

The policy being considered could allow automakers to import fully-built EVs into India at a reduced tax as low as 15%, compared to the current 100% for cars costing above $40,000 and 70% for the rest, said two of the sources, including a senior Indian government official.

Tesla's best-selling Model Y, for example, starts at $47,740 in the US before tax credits.

"There is an understanding with Tesla's proposal and government is showing interest," said the official, familiar with the issue.

The policy is still in early stages and the final tax rate could change, two sources said. If adopted, the policy could drastically reduce imported EV costs that local carmakers have sought to avoid. It could also open the door for global automakers, beyond Tesla, to tap the world's third-largest car market where EV sales are under 2% of total car sales, but growing rapidly.

The lower import taxes could help Tesla sell its full range of models in India, not just the new car it wants to make locally, said a third source. Shares of Tata Motors, India's largest electric car manufacturer, fell nearly 3% on the Reuters report, while rival Mahindra and Mahindra dropped over 2%, dragging the benchmark auto index to an intra-day low with 1.1% losses.

New Delhi will move slowly considering the proposal as lowering imported EV taxes could disrupt the market and upset local players like Tata and Mahindra investing to build electric cars at home, the Indian official said.

"This is going to go through much deliberation even though government is keen on getting Tesla. That's because of the impact on domestic players," said the official.

Tesla first tried entering India in 2021 by pushing officials to lower the 100% import tax for EVs. Last year, talks collapsed when officials said the company would have to first commit to local manufacturing. More recently, Tesla told Indian officials it is keen to set up a local factory and make a new EV priced around $24,000, roughly 25% cheaper than its current entry model, for both the Indian market and export.

  • India considering slashing EV import duties to attract Tesla manufacturing

  • Move follows Tesla proposal to enter Indian market with local production

  • Conditional low 15% import tax could allow Tesla full model range sale


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