An ET report quoted sources familiar with the matter, stating that the reduced import duties may be offered in lieu of bank guarantees by Tesla for an investment in constructing an electric vehicle factory in India.
Currently, India imposes a 100% import duty on cars with a value of more than $40,000 (about Rs 33 lakh) and 60% for cars below that threshold. However, Tesla has expressed its willingness to invest up to $2 billion if the Indian government offers a reduced import duty of 15% on imported electric cars during the first two years of operations.
Tesla in India soon?
To ensure timely investments and the establishment of local factories, the government is mulling reducing import duties temporarily based on bank guarantees. The exact quantum of the bank guarantee is yet to be determined. Bank guarantees can be encashed if companies fail to comply with the specified timelines for making investments.
While Tesla’s potential entry into the Indian market has sparked interest, Indian automakers are taking a cautious approach. Concerns have been raised about the possibility of unfair advantages for Tesla without a firm investment plan.
Last month, Anish Shah, the managing director of Mahindra & Mahindra (M&M), stated that his company had communicated with government officials that global electric vehicle (EV) manufacturers must be nudged to invest in India.
“It should be a level playing field… investing in India is important. Our approach is essentially to create a stronger industry in India, and not to be in a situation where manufacturing is done outside India, and India just becomes an importer of products,” Shah was quoted as saying at the World Economic Forum in Davos, without any particular reference to Tesla.
Homegrown auto majors like Tata Motors and M&M are already producing EVs locally.
