India has now officially confirmed the release of its new electric vehicle policy that exactly reduces import taxes. The statement indicates contingent on companies investing a minimum of $500 million and establishing a manufacturing plant within three years. This simply indicates a open way for Tesla's victory, aligning with the company's persistent lobbying efforts in New Delhi. Tesla's CEO, Elon Musk, had advocated for reduced import taxes, a move now poised to enhance the company's entry into the Indian market.
Investment threshold
As per the policy, the upcoming companies to commit to at least $500 million in investment and establish a manufacturing plant within three years, presenting an opportunity for Tesla and other global automakers to enter the Indian market.
Tesla's pursuit of Indian market
Despite facing resistance from New Delhi, Tesla's CEO, Elon Musk, has been striving to penetrate the Indian market for years. Tesla officials have engaged in multiple visits to India, with Musk even meeting Prime Minister Narendra Modi last year to explore avenues for market entry. Companies meeting the investment and manufacturing criteria can import a limited number of EVs at a reduced tax rate of 15% for cars priced at $35,000 and above. In India companies like Tata Motors, Mahindra and more rapidly gaining attention in the country. With electric models comprising less than 2% of total car sales in 2023, the government aimed to raise this share to 30% by 2030, presenting a lucrative opportunity for global automakers.
Beyond Tesla
While Tesla stood to benefit significantly from the policy, it also paved the way for other global automakers to tap into India's automotive market, the world's third-largest. Vietnamese EV maker VinFast, for instance, has announced plans to invest $2 billion in India, initiating the construction of a local factory in Tamil Nadu.
Are there any customs duties applicable on imported vehicles?
Yes, a customs duty of 15 per cent (as applicable to Completely Knocked Down units) would be applicable on vehicles with a minimum CIF value of USD 35,000 and above for a total period of 5 years, provided the manufacturer sets up manufacturing facilities in India within 3 years. For your information, companies must provide a bank guarantee equivalent to the customs duty forgone, ensuring compliance with the policy's mandates. Under the new policy, companies meeting the investment and manufacturing criteria can import a limited number of EVs at a reduced tax rate of 15% for cars priced at $35,000 and above.
