India is considering cutting the tax on imported electric cars. The decision, however, has not been made official as concern over domestic automakers looms.
According to a recent exclusive reportage from Reuters, import duties on electric cars in India might be cut to as low as 40%. This would apply to imported electric vehicles (EVs) with a value of less than $40,000, including the car’s cost, insurance and freight. Initially, the country applies 60% for imported vehicles that fall into the category.
Additionally, EVs that value over $40,000 might receive a cut to 60% from 100%, said the sources.
Quoted from Reuters, one of the officials said, “We haven’t firmed up the reduction in duties yet, but there are discussions that are ongoing”.
India and imported vehicle tax cuts: who is it for?
Despite being the world’s fifth-largest car market, cars that price below $20,000 remain to be the country’s most sold cars. This means among the 3 million vehicles reported in its annual sales, EVs only fill up a fraction of the total. Luxury EVs sales, industry estimates say, are nearly negligible.
International automakers have long lobbied India for lower import duties on luxury cars. Big-name companies such as Mercedes-Benz and Audi, however, faced strong resistance from domestic companies.
Recently, Tesla started the discussion again. Tesla argued that lower import duties on EVs could boost sales. As a note, the average sales for luxury cars in India only comes to around 35,000 vehicles a year. This statement further received support from Mercedes and Hyundai.
While this spurs up public debate among automakers, India’s government reportedly is discussing the issue. According to some, such a move would contradict India’s push to increase domestic manufacturing.
Another official, though, said the possibility of the duty cut negatively affecting domestic automakers is very small. As the duty cut only applies to EVs, local automakers that mainly manufacture affordable gasoline-powered cars will unlikely suffer from the tax alteration.
India to find ways to nurture domestic automakers
In accordance with this, the government will be looking to chances that companies like Tesla could benefit the domestic economy. For this to happen, one of the officials said, the companies might need to agree on, for example, local manufacture. Another solution is for the affected companies to pledges on sourcing parts domestically, the person said.
“Reducing import duties is not a problem as not many EVs are imported in the country. But we need some economic gain out of that. We also have to balance the concerns of the domestic players,” the official said.
The discussion over this issue will involve India’s finance and commerce ministries, as well as its federal think tank Niti Aayog, chaired by Prime Minister Narendra Modi. The officials will also invite all stakeholders to explain their proposals.
Read also: India Agrees to Tax Multinational Firms
Follow and join us on Youtube, Instagram, Facebook, and Twitter to be part of the trader community in Asia
