India Evaluates Reduced Tariffs on Imported EVs, Tesla Shows Interest

India is actively considering a proposal to lower tariffs for imported electric vehicles (EVs), a move that has gained interest from Tesla as the company evaluates the possibility of establishing a manufacturing plant in the country. This development was confirmed by Indian government officials familiar with the ongoing discussions.

Tesla has approached the Indian government requesting an initial reduction in the customs duty, which currently stands at 70% for cars valued under $40,000 and 100% for those over $40,000. According to the officials, Tesla’s proposal includes a concession on these tariffs for a certain period. One official stated, “Their view has always been that they need some tariff concessions at least in the interim period,” indicating that the concessions might come with a sunset clause.

The proposed tariff reduction under consideration would be a uniform 15% for EVs of all price ranges. However, this policy shift is yet to receive internal agreement within India’s government framework. An official emphasized the intention to develop an EV scheme beneficial for India and not tailored exclusively to one company, ensuring that other EV manufacturers could also utilize this opportunity. Tesla executives have engaged in multiple meetings with Indian government officials over the past year. During a state visit to the U.S. in June, Indian Prime Minister Narendra Modi met with Elon Musk in New York and encouraged Tesla to view India as a potential manufacturing hub.

Additionally, Piyush Goyal, India’s Commerce Minister, is scheduled to visit San Francisco for the Indo-Pacific Economic Framework for Prosperity and the Asia-Pacific Economic Cooperation forum. During this visit, there is speculation that Goyal may meet with Musk. Entering the Indian market represents both an opportunity and a challenge for Tesla. India’s EV market is nascent and predominantly oriented towards two-wheel vehicles. Any successful automobile venture in India would require competitive pricing to appeal to consumers in one of the world’s largest developing markets.

In discussions with the Indian government, Tesla has indicated the possibility of producing a vehicle under $30,000, which could be sold within India and potentially exported throughout the region, using India as a production base. Tesla, which is expanding its global factory network, has not provided any comments on this development. The company aims to reach a production target of 20 million cars a year by the end of the decade. If successful, Tesla would surpass current industry leaders Toyota and Volkswagen in terms of production volume.

This initiative is part of India’s broader strategy to close the gap with China in developing EV and semiconductor technologies. High tariffs on motor vehicles have historically been a challenge for foreign carmakers in India. The UK, in its free trade agreement talks with India, has also pressed for a reduction in car tariffs.