Disappointment For Elon Musk's Tesla As Centre Says No Plan To Reduce Taxes On Imported Electric Vehicles

Contrary to expectations, the Minister for State for Commerce and Industry, Som Parkash, announced in Parliament on Wednesday (13 December) that the Indian government has no plans to reduce taxes on imported electric vehicles.

This decision directly impacts Tesla's plans for its mega factory in the country, as the Elon Musk-owned company had sought tax breaks for the venture.

“There is presently no proposal to grant an exemption from the local value addition cost or to provide a subsidy on the import duty on electric vehicles in India,” stated the Minister of State.

Tata Motors remains the dominant force in the Indian electric car market, with its Nexon EV outperforming other electric vehicles, including MG Motors' recent entry into the segment.

With India's efforts to boost local electric vehicle production, including a Rs 3.1 billion incentive programme launched in 2021 and incentives for battery manufacturing companies, the government's decision not to offer tax breaks on imported electric vehicles is a surprising development.

The government had been working on a policy to allow international companies to import electric cars at concessional tax rates with a commitment to eventual local manufacturing. However, this statement marks a shift from that direction.

Tesla and the Indian government were reportedly close to an agreement for manufacturing cars in India, with discussions on selling cars manufactured abroad in the country from 2024 and the possibility of establishing a mega factory within the next two years.

However, the recent announcement suggests a potential delay in these plans.

Union Commerce Minister Piyush Goyal had previously mentioned that Tesla was set to purchase parts worth $1.9 billion from India this year.