India seeks Tesla sourcing and manufacturing plans before offering tax breaks

Government is considering slashing import duties on electric cars to as low as 40 per cent

India has asked Tesla to increase local procurement and share detailed manufacturing plans before the carmaker’s demands for lower taxes on electric vehicles are considered.

The ministries of heavy industries and finance sought the details from Tesla in a meeting earlier this month even as the government examines billionaire Elon Musk’s demand for lower taxes on EVs in Asia’s third-largest economy, a person with knowledge of the matter said.

The departments also asked Tesla for its thoughts on importing fully built cars versus so-called knocked-down units or partially built vehicles, which attract a lower import levy.

California-based Tesla wrote to Prime Minister Narendra Modi’s government in July asking for the import duty on electric cars to be reduced to 40 per cent from the current 60 per cent. The company also asked for the 10 per cent social welfare surcharge – which is levied on all imported cars and helps fund health and education programmes – to be scrapped.

At the meeting, Tesla claimed it has procured components worth $100 million so far from India and suggested that figure would increase following any tax concessions, the person said. Tesla also pledged to make significant direct investments in sales, service, and charging infrastructure and evaluate broader investments in manufacturing once it enters the world’s second-most populous nation.

Updated: August 13th 2021, 8:18 AM