India has announced a significant policy shift aimed at incentivizing electric vehicle (EV) manufacturing within the country, potentially clearing the path for Tesla’s entry into the South Asian market. Under the new policy, companies investing a minimum of $500 million in India and establishing local manufacturing facilities within three years will benefit from reduced import taxes on certain EVs.
The key requirements for companies to avail of the reduced import duties include investing $500 million in the country and ensuring that at least 25% of the EV components are domestically sourced. Those meeting these criteria will be allowed to import up to 8,000 EVs annually at a reduced import duty of 15% for vehicles priced at $35,000 and above. This marks a significant reduction from India’s current import tax rates, which range from 70% to 100% depending on the value of the imported cars.
The move is expected to pave the way for Tesla’s long-anticipated entry into India, as the company has been in talks with the government for years regarding lower import duties on its electric vehicles. It also aligns with India’s broader goal of promoting EV adoption and reducing reliance on oil imports, with a target of achieving 30% electric car sales by 2030.
The Ministry of Heavy Industries highlighted the various benefits of the new policy, including increased access to advanced EV technology for Indian consumers, support for the “Make in India” initiative, and fostering healthy competition among EV manufacturers. Additionally, the policy aims to reduce air pollution, lower the trade deficit, and have a positive impact on both health and the environment.
India’s Commerce and Industry Ministry has specified that companies investing at least $800 million will be eligible to import up to 40,000 EVs, with a cap of 8,000 units per year.
Tesla’s entry into India has been long-awaited, with the company initially planning to establish local operations in 2021. The decision was postponed until the Indian government allowed Tesla to sell and service imported cars in the country. Tesla is expected to initially import EVs from its Shanghai plant in China, with plans to establish local manufacturing and a battery plant in India over the coming years.
In addition to Tesla, other EV manufacturers are eyeing India as a strategic manufacturing hub. VinFast, a Vietnamese electric carmaker, plans to invest $2 billion in India, while Lotus Cars, owned by China’s Geely, has already entered the market with its electric SUV Eletre.
Overall, India’s EV policy shift not only signals opportunities for major players like Tesla but also underscores the country’s commitment to accelerating the transition towards sustainable mobility.
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