Centre may reduce import duty for Tesla in lieu of an EV factory in India

Centre is close to approving a policy to extend the concessions on import duty on electric cars priced above Rs 30 lakh for 2-3 years, which may allow Tesla to enter the Indian market, The Economic Times (ET) reported on Thursday.

The report added that this is likely to be offered against bank guarantees by the US-based car maker for investment to build an electric vehicle (EV) factory in India.

Currently, India imposes 100 per cent import duty on cars that cost more than Rs 33 lakh, including freight and insurance charges. Below this threshold, a duty of 60 per cent is imposed.

Tesla had earlier asked the Centre to reduce the import duty to 15 per cent on its cars for the first two years, in exchange for an investment of up to $2 billion in India.

A person was quoted in the report as saying that the quantum of bank guarantees has not been finalised yet. Notably, bank guarantees can be encashed by the government if a company does not comply with its commitments.

However, Indian automakers are concerned about the reduction in import duty to Tesla. They think it would lead to an unfair advantage to the American carmaker.

In January, Anish Shah, managing director at Mahindra & Mahindra said at the World Economic Forum, "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."

The Indian companies have yet not communicated any formal objection to the Centre.