This Is How Indian Govt Is Helping Elon Musk To Launch Tesla In India (Explained)


Mohul Ghosh

Mohul Ghosh

Mar 16, 2024


New EV Policy Provisions for Import Rate Cut

India’s latest electric vehicle (EV) policy introduces several provisions aimed at incentivizing foreign investment in the country’s burgeoning EV sector. One such provision offers duty concessions on imported cars for companies willing to invest a minimum of $500 million in establishing manufacturing units within India. These concessions are a strategic move by the government to attract global automotive giants like Tesla, known for their advanced electric vehicle technology, to set up production facilities in the country.

This Is How Indian Govt Is Helping Elon Musk To Launch Tesla In India (Explained)

Under the policy, companies must commit to investing a minimum of $500 million, or approximately ₹4,150 crore, in manufacturing facilities within three years to avail the import tax concessions. The duty concessions on total imported electric vehicles (EVs) are capped at the investment made or ₹6,484 crore, whichever is lower. This cap ensures that the incentives provided align with the government’s broader policy goals while encouraging substantial investment in domestic manufacturing capabilities.

Additionally, if the foreign investment exceeds USD 800 million, the policy allows for a maximum of 40,000 EV imports over five years, subject to a lower tax rate of 15 per cent on cars costing $35,000 and above. This provision aims to balance the influx of imported EVs with the development of indigenous manufacturing capacity, ensuring that the benefits of the policy are sustainable in the long run.

To enforce these commitments, companies are required to provide a bank guarantee, serving as collateral for the forgone customs duty. This requirement adds a layer of accountability, ensuring that companies fulfill their investment pledges and contribute to the growth of India’s EV ecosystem as promised.

Elon Musk’s Tesla: Beneficiary of Policy Reforms

The reduction in import tax rates under India’s new electric vehicle policy marks a significant victory for Tesla, the American electric vehicle manufacturer led by entrepreneur Elon Musk. Tesla has long expressed interest in entering the Indian market, but high import duties have been a major obstacle. With the implementation of the new policy, Tesla stands to benefit from reduced import taxes, making its vehicles more competitive in the Indian market.

Despite previous roadblocks, including demands from the Indian government for local manufacturing commitments, Tesla’s persistence seems to have paid off. Over recent months, Tesla representatives have engaged in extensive discussions with Indian authorities, including Prime Minister Narendra Modi, signaling the company’s commitment to establishing a presence in India’s growing EV market.


Mohul Ghosh
Mohul Ghosh
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