Tesla’s plan to sell EVs in India faces roadblock as government says no proposal to cut import duty

The government has said there are no intentions to offer subsidies for the import of electric vehicles into the country. This development appears to be a major setback for the US electric vehicle (EV) manufacturing giant Tesla’s ambitions to enter the India market.

In a written reply to a question raised in Parliament, Minister of State for Commerce and Industry Som Parkash clarified that there is no proposal to either provide an exemption from local value addition cost or to provide a subsidy on the import duty on electric vehicles.

“Presently, there is no proposal either to provide an exemption from local value addition cost or to provide a subsidy on the import duty on electric vehicles in India,” Parkash’s written reply stated.

In his reply, Parkash highlighted some of the existing policy initiatives and measures to create a strong ecosystem to promote industrialisation and domestic value addition, and make India globally competitive.

“Government has also taken various steps to boost domestic and foreign investments in India to enhance local value addition under the Make in India initiative. These include the introduction of Goods and Services Tax, reduction in corporate tax, improving ease of doing business, FDI policy reforms, measures for reduction in compliance burden, measures to boost domestic manufacturing through public procurement orders, Phased Manufacturing Programme (PMP) and QCOs (Quality Control Orders), to name a few,” he said.

Apart from the above, Parkash said the government had also launched the Production Linked Incentive (PLI) Scheme for the automobile and auto component industry with a budgetary outlay of Rs. 25,938 crore to provide financial incentives to boost domestic manufacturing of advance automotive technologies (AAT) products (including electric vehicles and their components).

However, he made it clear that there is currently no proposal to provide a subsidy on EV import duties, a long-standing demand from Tesla, which has been longing to enter the Indian market for years.

The minister’s response comes as a big blow to Tesla’s aspirations to sell its EVs in India, potentially leading to an impasse. It’s worth noting that Tesla representatives have engaged in discussions with government officials over the past few months, it seems no mutually agreeable terms have been reached so far.

While the government has been pushing for Tesla to manufacture cars locally, the automaker is insisting on lower import taxes initially to make its globally produced vehicles competitive in the Indian market.

Even during Prime Minister Narendra Modi’s US visit in June, Tesla CEO Elon Musk had expressed the company’s willingness to make a “significant investment” in India. In return, Tesla has been negotiating for reduced import taxes at the outset.

However, the government’s stance on import duties could result in further delays for Tesla’s entry into the Indian market.

This development comes shortly after the government and Tesla were on the verge of reaching an agreement that would enable the US automaker to commence car sales in India from next year and establish a factory within two years.