NEW DELHI: A month after the central government announced a hefty cut in import duty on electric vehicles (EVs) if global manufacturers want to invest in India, billionaire Elon Musk-led Tesla is likely to send a team to the country this month to search for locations for a proposed $2-$3 billion electric car plant.
This is not the first time that the US-based electric carmaker has shown interest in investing in the country. However, market experts believe revised norms for imported EVs, which is what Tesla was lobbying for, make it a compelling case for them to start making four-wheelers in India.
According to reports, Tesla is keen on investing in India as EV demand is slowing in its main markets — the USA — and its other big market China has become highly competitive with BYD becoming more aggressive and Xiaomi launching its first EV last week. All these factors impacted Tesla and it reported a drop in its first-quarter deliveries.
Tesla will most likely set up its base in Indian states that have automotive hubs such as Maharashtra, Gujarat and Tamil Nadu, according to a report. Tesla has reportedly told Indian government officials that it is considering building a smaller car here which would be priced at less than $30,000. It can sell the model here and export to Southeast Asia, the Gulf, Africa, and southern and eastern Europe.
In a bid to attract Tesla and other global automakers to start manufacturing EVs in India, the central government on March 15 made big changes in its EV policy.
The government has allowed import of completely built-up (CBU) electric cars that have a minimum cost, insurance and freight (CIF) value of $35,000 at 15% import duty for a period of 5 years. Currently, CBU vehicles priced at over $40,000 attract a 100% duty while those below $40,000 are subject to 70% tax. This benefit is applicable for applicants/companies who are committing a minimum investment of `4,150 crore or $500 million, to manufacture in India. The companies will also have to meet other requirements such as increasing the rate of localization to 25% in three years and 50 % within 5 years.
The changes in import duty came as India is pushing hard to increase the adoption of EVs to cut import of crude oil and meet its carbon reduction target. At present, shares of electric cars in India are about 2% of total passenger vehicle sales as higher prices and lack of charging infrastructure remain a big concern among car buyers.