India’s Import Tax Cuts Present An Opportunity For Tesla

Last Friday, the Indian government announced that it would cut the import tax on vehicles, which is exactly what electric car manufacturers like Tesla and other competitors are looking for to get their foot set in the third-largest car market in the world. 

For years now, the import tax in India has been very hefty. The import tax on foreign EV cars was around 100%. This means a Tesla that costs around $50,000 in the USA will cost almost $100,000 in India. For this reason, many car manufacturers were shying away from entering the Indian automobile market. 

However, things look different after last Friday. In a statement, the Ministry of Heavy Industries said it would reduce the tax tariff for companies planning to do some of their production in India. According to the statement, if a foreign car manufacturer invests a minimum of $500 million in India, their tax will be cut to 15%, and there will be no tax for vehicles under $35,000. 

The only caveat to this development is that the Government has put a sales cap on the number of units these foreign automakers can sell. Under the new rules, foreign EV manufacturers cannot sell more than 8,000 units annually. This is not feasible for many car manufacturers. Last December, Tesla sold around 100,000 units in China alone; 8,000 units are nothing compared to that. 

However, car manufacturers expect the government to ease the sales cap in the future, which can be good for them. Car manufacturers like Elon Musk, who is regarded as one of the best CEOs in the world, have high hopes for India. Elon also praised the PM’s initiative to push the EV segment in India. This will be a very good opportunity for Tesla and its competitors to enter India’s $151 billion automobile market and make their place. The current share of EVs in the market is 1%, which is not enough. However, the Indian government expects EVs’ market share to increase to 35% in the next 6 years. 

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