Tesla needs to commit to Gigafactory India for reduced import duties: officials

Tesla factory in Tilburg, Netherlands. (Credit: Tesla)

Tesla is set to possibly receive a reduction in India’s import duties under the condition that it plans to manufacture cars in the country, government officials said.

For years, Tesla has attempted to enter India as a domestic carmaker to supply its electric vehicles to potential customers in the Indian market. Upon the request of the company’s fans, CEO Elon Musk stated in late 2020 that the company would begin making an entrance. It was just unclear how.

Tesla’s eventual emergence into India as a car manufacturer and sales entity has been a tumultuous road in 2021. At the beginning of the year, Tesla applied for and received two business licenses: one as a manufacturer and one for sales. However, despite receiving permission to build and sell Tesla’s popular electric cars in India, Musk was not convinced that the automaker would be successful to the point that would warrant the company to build a new manufacturing facility in India. As a result, Musk stated that he would be more comfortable testing the waters of demand by importing the company’s four all-electric models to India. If things went well, a Gigafactory would be built.

This brought Tesla’s executives to request import duty reductions for Tesla and other EV manufacturers in mid-July. The request cited a more appropriate import duty rate of forty percent, more reasonable than the sixty percent tax that applies to cars under $40,000 and the one hundred percent penalty applied to cars over that threshold. The request didn’t appeal to country politicians, who have held their priorities on local, domestic manufacturing. Foreign companies would have to pay to play in India, including Tesla.



Indian officials said:

“The government has made its stance against company-specific incentives clear. This also applies for one particular company requesting industrywide changes to existing policy. Over the past four years, multiple demands were made by a large US-based firm to open up the market at lower import duties as well. Now, they locally produce in India and are ramping up capacity.”

Now, high-ranking Indian government officials are reconsidering Tesla’s request, stating that the country could lower import duties if Tesla commits to manufacturing vehicles in a facility that it will build in India.

“We will be open to consider, especially if they will set up a manufacturing place here,” an official told India Today.

The official added that this would not apply to Tesla specifically but to any foreign EV company that wanted to receive reduced import duties on its vehicles.

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