Tesla’s proposal for lower import duty finds traction
Business proposal

Tesla’s proposal for lower import duty finds traction

NEW DELHI: Tesla’s proposal for a reduction in import duty to enter India has been backed by several government agencies, including the road transport ministry, department for promotion of industry and internal trade and NITI Aayog, with a final call now to be taken by the finance ministry.
The heavy industries ministry is the sole dissenter amid strong opposition from some of the largest auto industry players, government sources told TOI, arguing that the concessions could help in the medium-term.
Officials indicated that there is discussion around the tariff cuts coming with certain conditions, which may include a mandated level of infrastructure creation in the form of charging stations or similar requirements.
Alternatively, a domestic sourcing clause could be added, which will require the Elon Musk-founded entity to buy some components from India, a model that was tried with single-brand retailing in the initial years.

Some sections in the government are, however, in favour of getting the company to invest in charging infrastructure, which will not just help Tesla buyers but can also come handy for other electric vehicles users. They are arguing that the component suppliers may not be immediately available and in any case tracking compliance is often tough.
Musk has been discussing an entry into India for the last few years, but it is contingent upon the concessions. Sources said Tesla has sought a lower import duty of 40% from current 60% on fully assembled electric cars priced below $40,000, and 60% from current 100% on vehicles above $40,000.
Over the next few years, the government is hoping that Tesla could begin manufacturing in the country. The Palo Alto-headquartered company has registered an entity in India as part of its plans to foray here and start with its plans to have dealers here.
Union road transport minister Nitin Gadkari had urged the top company executives that Tesla must have its manufacturing unit in India. “If they have to manufacture here, they need the numbers and no one can test the market when you impose such high import duty on the vehicles,” said a high-ranking officer.
The proponents of local sourcing argue that it will help develop a vendor base in the country, which will be beneficial for the electric vehicle space in the long run.
The government has been seeking to promote electric vehicles but the resistance from the domestic auto manufacturers has forced it to go slow apart from turf issue between the road transport ministry and NITI Aayog. On the issue of Tesla’s entry, however, both seem to be on the same page.
In the past, the finance ministry has shunned proposals from companies such as Apple to enter India purely to sell its products and has instead preferred a model where the overseas player also sets up some manufacturing facility. Officials supporting Tesla’s plan, however, argue that it is important for any company to test the market for a few years before making a large commitment.