The demand for Tesla's arrival in the Indian market is in full swing. Even the brand has already started testing the Model 3 sedan on our soil, which will be the first offering from the American EV maker in our market. It will be launched here via the CBU route. In fact, if successful with imported vehicles, Tesla also intends to set up its Giga factory in India for local manufacturing. However, this is where Tesla's difficulties begin, which Elon Musk recently highlighted on Twitter.
Replying to a tweet in which a person asks the CEO to launch Tesla cars in India ASAP, Musk said: – We want to do so, but import duties are the highest in the world by far of any large country! Moreover, clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India. However, he further added – But we are hopeful that there will be at least a temporary tariff relief for electric vehicles.
What Elon Musk has tweeted is actually true. At present, the import duties stand at 60% for fully assembled cars priced below $ 40,000 (Rs 29.79 lakh) and 100% for those above this price point. Now, it is important to note that only the standard range plus variant of Model 3 is priced below $ 40,000 in the US. This means if Tesla imports Complete Build-Up (CBU) units to Indian shores, they won't be cost-effective at all and will be out of reach of most customers.
On the other hand, the Indian government has raised import taxes to promote local manufacturing. But Tesla will consider local production only after there is a substantial success with imported models. And so, the brand is in talks with the Indian government seeking a big rebate in import duties on electric vehicles. Also, it has been reported that the company has written a letter to the transport and heavy industries ministries along with the country's leading think-tank Niti Aayog, suggesting a reduction of the federal taxes on imports of fully assembled EVs to 40%. Musk feels that temporary tax relief will go a long way in boosting Tesla's demand in India.
The ministries are yet to make any decision on the given note. But we do not expect any relief on import duties from the central government as it will affect their plans of boosting local manufacturing, which was the main cause for increasing taxes in the first place. However, the Union transport minister, Nitin Gadkari has earlier stated they would be willing to offer incentives to ensure Tesla's cost of production in the country is less than that in China, but only if it manufactures locally. However, setting up a factory before its arrival and that too for a segment that is still in its early stages in the country — is a matter of concern, even for a renowned brand like Tesla.
