Huge Setback For Elon Musk: Govt Refuses To Provide Tax Incentives For Making Tesla Cars In India; What Next?

Bringing an end to a long drawn tussle between Elon Musk and the Indian government, the latter has said that it will not lower tax breaks on imported electric cars.

Existing Rules Sufficient

The government said that existing rules already allow bringing in partially-built vehicles and completing the assembly locally at a lower levy.

Vivek Johri, chairman of the Central Board of Indirect Taxes and Customs, said that they looked at whether the import duties need to be revised. 

But the current tariff structure has led to domestic production and has brought in investments.

Therefore the existing duties are “not a hindrance.”

Govt Wants Tesla To Build Locally

Modi’s administration has invited Tesla to produce locally. 

It suggested that Tesla consider importing partially built vehicles, which attract a lower import levy, instead of fully-built units.

But Musk wants the country’s taxes to be lowered which can be as high as 100% on imported EVs.

The company will then sell vehicles built elsewhere at competitive prices.

Exorbitant Import Duties

India currently charges customs duty between 60% to 100% on imported cars.

100% duty is imposed on fully imported cars with CIF (Cost, Insurance and Freight) value over $40,000.

60% duty is imposed on cars costing less than that amount. 

This means that there is only one car from its lineup that Tesla can sell in India without incurring 100% duty- the Model 3 Standard Range Plus- which is priced below $40,000.

On Indian roads, it would cost roughly around Rs 70 lakh.

States Invite Musk To Do Business

The government had asked Tesla to submit a plan for local manufacturing and procurement from India but it hasn’t done that yet.

Meanwhile, Tesla has received invitations from at least four Indian states to set up its business  there. 

Politicians from Maharashtra, Punjab, West Bengal, and Telangana tweeted to Musk, extending invitations to him to set up business in their respective regions.

Follow Lead Of Indian Cos

Johri said that Tesla should emulate domestic companies like Mahindra & Mahindra Ltd. and Tata Motors Ltd., which are investing in  local production of EVs.

Tesla is competing with the likes of Mercedes-Benz which will introduce its locally assembled electric version of its flagship S-Class sedan- the EQS.

It will arrive in India by the fourth quarter of this year.

There are also affordable petrol- and diesel-powered cars locally made by Hyundai Motor Co. and Suzuki Motor Corp.