February 15, 2024
Tesla may offer bank guarantees in exchange for reduced import duties for its proposed US$ 2 billion investment in an Indian electric vehicle factory
The government considers temporary import duty reduction, contingent on bank guarantees, to accelerate investments and local factory establishment
India imposes 100% import duty on cars over US$ 40,000 and 60% for those below
ndian automakers adopt a cautious approach, expressing concerns over potential advantages to Tesla without firm investment plans
Tesla, the US electric automaker, is on the verge of entering the Indian market as the government is finalising a policy to extend preferential import duties on electric cars valued over INR 30 lakh for 2-3 years. In exchange for this, Tesla may provide bank guarantees for its proposed investment in establishing an electric vehicle factory in India, according to sources familiar with the matter.
Currently, India imposes a 100% import duty on cars valued over INR 33 lakh and a 60% duty for those below this threshold. Tesla has expressed its willingness to invest up to $2 billion if the government grants a reduced import duty of 15% on imported electric cars during the initial two years of operation.
To encourage foreign automakers to contribute to India’s expanding market and stimulate employment, the government is considering a temporary reduction in import duties, contingent on bank guarantees. The specific amount of the bank guarantee is yet to be determined, but the intention is to ensure timely investments and the establishment of local factories by the companies, as explained by one of the individuals mentioned above. Bank guarantees can be invoked in case of non-compliance with the specified investment timelines.
Facing the potential for relaxed import duties for Tesla, Indian automakers are adopting a cautious approach, observing the developments before making any decisive moves. A senior industry executive, preferring anonymity, revealed that while the industry has not officially communicated objections to the government, several car manufacturers are concerned about the possibility of giving an unfair advantage to Tesla, which has not yet solidified its investment plans.
Last month, Anish Shah, Managing Director of Mahindra & Mahindra (M&M), conveyed concerns to government officials, highlighting the importance of encouraging global EV manufacturers to invest in India for a level playing field. The focus is on fostering a robust industry within India rather than relying on imports, as articulated by Shah during the World Economic Forum in Davos, without explicitly mentioning Tesla.
Source: Economic Times