As compared to 100% import duty on cars costing more than $40,000, government is thinking about reducing tax to just 15%
Make in India has benefitted various sectors such as electronics manufacturing, pharmaceuticals, renewable energy, defence manufacturing, space, food processing, etc. The automobile and automobile components manufacturers have also benefited from Make in India initiative. Going forward, the government may implement a more flexible approach for specific auto segments such as electric vehicles.
Tesla EVs could get cheaper
Tesla has been eying the Indian EV space since several years. However, due to the high import duty, plans for India have been moving at a slow pace. While there is no official confirmation from the government, it appears that a middle ground is being worked out.
One of Tesla’s primary conditions was to test the Indian market, before committing to setting up a manufacturing unit in the country. For this, Tesla wanted the import duties to be scrapped. But that was not accepted, as the government was committed to its Make it India initiative.
New report reveals that the Indian government is now working on a more inclusive electric vehicle policy. It will enable carmakers like Tesla to test the waters before committing huge investments. Tesla has already rented space in India, which can be deemed as a positive development in the company’s plan to start India operations.
As per the new electric vehicle policy being framed, import duty on high-end electric cars could be reduced to just 15%. This will allow carmakers like Tesla to import fully-built (CBU) EVs into India. The reduction in import duty will also benefit other luxury players such as BMW, Mercedes, Audi and Volvo. It will result in significant reduction in prices of imported luxury electric vehicles.
Provisions to support Make in India
While import taxes for premium EVs could be lowered, it will be applicable with a set of conditions. This will ensure that the new electric vehicle policy continues to support the Make in India initiative. Taxes will be lowered only if the company commits to some level of local manufacturing in the initial stages. The overall quantum of local manufacturing will have to be increased gradually. Carmakers will also be required to start sourcing components locally. They will need to provide bank guarantees that will cover for any defaults in their commitments.
The bank guarantees will also be used to create an ecosystem for local suppliers. In the first two years, local sourcing will have to be around 20%. By the fourth year, local sourcing will need to be increased to around 40%. The new electric vehicle policy is currently in draft stages. So, these numbers may change in the final version.
While lowering taxes for high-end EVs may have its benefits, the government should be watchful of players that may use this as an opportunity to flood the market with imported cars. A provision for anti-dumping duty can be made in the new EV policy. This will help create a level-playing field for local manufacturers, who have invested a great deal of money in building their EV portfolio.
Source
Source: Electric - rushlane.com
