India Lowers EV Import Duties To 15% To Attract Tesla – RM2.3B Investment Required

India made a significant move on Friday by lowering import duties on specific electric vehicles (EVs) in order to attract investment from EV automakers. This special exemption  only applies to manufacturers who promise to invest at least $500 Million (RM2.3 Billion) and begin domestic production within three years.

According to many, while this is open to all foreign EV manufacturers, it was specifically designed with Tesla in mind, as the American EV powerhouse has been lobbying for a significant tax reduction despite opposition from local automakers such as Tata Motors and Mahindra & Mahindra.

Elon Musk, Tesla's CEO, has long sought to establish a presence in India, but New Delhi insisted on a commitment to domestic manufacturing. After multiple visits by Tesla officials and a meeting between Musk and Prime Minister Narendra Modi in June, the tide has finally turned in Tesla's favour.

According to reports from July, Tesla proposed manufacturing an entry-level EV priced at $24,000 (RM113,000) to compete with China's BYD, which is gaining traction in the EV market due to Tesla's lack of cheaper options and ageing product lineup.

Furthermore, as a bonus to Tesla, BYD's plans to invest in Indian EV production have been hampered by stringent investment regulations in countries bordering India.

Under the new policy, which took effect immediately, qualifying companies can import up to 8,000 EVs priced at $35,000 (RM165,000) or more per year at a 15% tax rate, as opposed to the current 70% or 100% imposed on imported EVs, depending on their value.

This figure is very good for Tesla, as its entry-level vehicle, the Model 3, starts at $38,990 (RM183,000).

The policy change will also allow EV imports at a lower tax rate for up to five years, with the duty exemption limited to the company's investment or approximately $800 Million (RM3.8 Billion), whichever is less.

According to India’s Minister of Commerce, Piyush Goyal, this reduction in import duty is an invitation to global firms as the ministry is confident in India's potential to become a leading hub for EV manufacturing, thereby fostering job creation and boosting trade.

While India's EV market remains low, it is on an upward trajectory, with Tata Motors dominating sales. Electric vehicles accounted for approximately 2% of total car sales in 2023, with the government aiming for a 30% share by 2030.