Big Blow To Tesla As India Rules Out Reduction In Import Taxes On Electric Vehicles

Big Blow To Tesla As India Rules Out Reduction In Import Taxes On Electric Vehicles
Image source: AFP

The Indian government stated that it has no intention of reducing import taxes on electric vehicles, which can prove to be a setback for Tesla. This comes days after Tesla CEO Elon Musk expressed hope that the government will reduce the import duties.

On Monday, junior minister Krishan Pal Gurjar  said, “No such proposal is under consideration in [the] ministry of heavy industries.” He added that instead, the government is taking steps to promote the use of electric cars by lowering domestic taxes and adding charging stations. The response may be interpreted as part of a tug-of-war between Prime Minister Narendra Modi’s government, which wants to encourage domestic manufacturing, and Tesla, which wants India to enable it to import vehicles more cheaply before committing to building a plant in the nation.

Elon Musk previously stated that he is looking for “temporary tariff relief for electric vehicles”. Musk has stated that Tesla intends to introduce its vehicles in India shortly, but Indian “import duties are by far the highest in the world of any big country!”

According to Bloomberg, Tesla wrote to the transport and industry ministries last month, requesting that import duties on electric vehicles be reduced to 40 percent from the existing range of 60 to 100 percent.

Musk responded to YouTuber Madan Gowri, who had asked him to introduce Tesla vehicles in India, saying, “We want to do so, but import duties are the highest in the world by far of any large country! Moreoever, clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India.”

In another tweet Musk also stated that Tesla would be interested in establishing a manufacturing plant in India if the imported vehicles are well received.

Tesla is attempting to gain a foothold in India – Asia’s third-largest economy – where electric vehicles account for less than 1 percent of annual auto sales, compared to around 5 percent in China. The lack of charging infrastructure and the high cost of electric vehicles have discouraged large-scale adoption in India, as opposed to China, where Tesla established its first plant outside of the United States and now leads electric-car sales.

These impediments have also made Maruti Suzuki India Ltd., the country’s largest automaker that sells every other car on Indian roads, pessimistic about the country’s adoption of electric vehicles.

“Unfortunately the technology presently available leads to electric cars being produced at a cost much higher than the conventional cars,” Maruti’s Chairman R.C. Bhargava said in the company’s annual report. “This, along with the lack of charging infrastructure makes it very difficult to sell electric cars to people who can only afford small cars.”


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According to Bhargava, who leads the Indian unit of Japan’s Suzuki Motor Corp., market penetration of electric vehicles would be “extremely limited” because just 5 percent of automobiles sold in India are priced above ₹1.5 million. He also adds that as India’s per capita income is barely $2,000, or 5 percent of that of Europe and Japan, costly electric cars are out of reach for most buyers. Maruti will work on hybrid vehicles, enhance technology for cars that operate on compressed natural gas, and investigate biofuels to reach net-zero emissions. “The usage of hydrogen is also an interesting possibility that should be investigated, particularly to minimise reliance on lithium imports,” says Bhargava.

Such data have sparked fears that unless progress is made in cleaning up the roads of poorer countries, global warming may not be contained below hazardous levels, even with richer countries seeking to phase out combustion-engine cars to address climate change.

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