India is considering tax breaks on imports of fully-built units of electric vehicles for up to five years as it tries to entice the likes of Tesla Inc. to sell and eventually manufacture their cars in the country.
The Indian government is working on an electric vehicle policy that would allow international carmakers to import battery-powered vehicles at concessional duty rates if they commit to eventually building them in India, people familiar with the matter said.
No final decision has been taken on the contours of the policy, the people said, asking not to be identified because the discussions are private. Spokespeople for India’s heavy industries and commerce ministries did not immediately respond to emails seeking comment.
The Austin-based EV maker had sought duty cuts on imports of electric vehicles in 2021. It had hoped to reduce the duty on its vehicles to 40% from the current range of 70%-100%, depending on the import value.
Tesla chief executive Elon Musk is expected to meet India’s trade minister Piyush Goyal later this week to discuss the company’s plans to set up a factory in the South Asian country. Goyal is in San Francisco to attend the Indo-Pacific Economic Framework and Asia-Pacific Economic Cooperation ministerial meetings.
Tesla is seeking to break into one of the world’s most promising auto markets, where demand for electric vehicles is growing among the country’s burgeoning middle class. For India, Tesla’s investment would support the government’s push to increase the share of manufacturing in the country’s GDP while creating jobs.
India’s electric vehicle market is currently at a nascent stage, with EVs accounting for just 1.3% of total passenger vehicle sales last year. The adoption of EVs in the country has been held back by the high cost of cars, a lack of options and a shortage of charging stations.
Opening up the EV segment could accelerate the adoption of cleaner transport in a country that currently has the most toxic air in the world. The government has launched a $3.1 billion incentive programme in 2021 to boost local EV production.
Separately, India is also considering reducing import taxes on some electric vehicles from the UK as part of negotiations with the UK on a free trade agreement.
