The reduced import duties are likely to be offered in lieu of bank guarantees by Tesla for a proposed investment to build an electric vehicle factory in India, people aware of the developments told ET.
India imposes 100% import duty on cars with cost, insurance and freight value of more than $40,000 (about Rs 33 lakh), and 60% for those below that threshold. Tesla is willing to invest up to $2 billion if the Indian government offers reduced import duty of 15% on imported electric cars in the first two years of operations, ET had reported.
The Centre is keen that foreign automakers entering the large and growing Indian market accelerate plans for local manufacturing to boost employment generation while bringing down prices of electric vehicles through localisation. “The government is looking at reducing import duties temporarily, based on bank guarantees. The quantum of the bank guarantee has not been determined (yet), but the thought is that this will help ensure that companies make timely investments and set up local factories,” said one of the persons cited above. Bank guarantees can be encashed in the event of non-compliance with timelines specified for making investments.
Faced with the prospect of relaxed import duties for Tesla, Indian automakers are taking a cautious wait-and-watch approach before making any move.
A senior industry executive who did not wish to be named said while the industry has not yet formally communicated any objection to the government, several carmakers have been concerned that any reduction in import duty will result in an unfair advantage to the American carmaker, which has yet to make a firm investment plan.Last month, Mahindra & Mahindra (M&M) managing director Anish Shah said his company had made representations to government officials, saying global EV makers 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 said at the World Economic Forum in Davos, without referring to Tesla by name, as per media reports.
Homegrown auto majors like Tata Motors and M&M already produce EVs locally.
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