Electric Vehicle Import Duty Reduction in India Could Pave Way for EV Makers like Tesla

Tesla has been looking to enter the Indian market for quite some time, but high import taxes delayed its plans. The Indian government's new EV strategy has successfully addressed the problem, providing relief to not just Tesla but several other global automotive players. The government issued the long-awaited electric vehicle policy last week which reduces import duties on some electric vehicles from a whopping 70-100% to 15%. However, global players must meet specific requirements to benefit from the scheme. Based on the new EV policy, the government will lower import taxes for five years on vehicles with a CIF (cost, insurance, and freight) value of USD 35,000 (Rs 29 lakh) or more if their manufacturers agree to invest a minimum of USD 500 million (Rs 4,150 crore) to establish local manufacturing units within three years.

While carrying out the production of electric vehicles here, foreign companies are required to attain a domestic value addition (DVA) of 25% by the third year and at least 50% within five years. It is essential to keep in mind that the amount of customs duty the government is willing to waive is restricted to either Rs 6,484 crore or the manufacturer's investment, whichever is less. Furthermore, the centre will allow the entry of up to 40,000 EVs at the reduced import duty, or around 8,000 EVs annually, if the investment is USD 800 million (Rs 6,629 crore) or more. Units that are not utilised can be carried over to the following year. The authorities further specify that the company's commitment to the investment must be strengthened by a bank guarantee, which takes the place of the waived customs duty. If the minimum investment and domestic value addition (DVA) requirements outlined in the rules are not met, the bank guarantee will be invoked.

Some More Highlights 

The objective of the new regulations is to make India a major hub for electric vehicles. The reduction in import duties aims to draw revenue for multiple well-known international automakers. Concerning Tesla in particular, the new EV policy looks like an achievement because the firm has been pondering entering India for some time and has only delayed plans because of the hefty import taxes. Previously, the global electric vehicle manufacturers were required to pay 100% of the custom duty on cars imported as Completely Built Units (CBUs) priced at more than USD 40,000 (about Rs 33 lakhs), including cost, insurance, and freight (CIF), and 60% of the custom tax on cars valued less.