Tesla has asked India’s Prime Minister Narendra Modi’s office to cut import taxes before electric cars enter the market, four sources from some Indian automakers told Reuters. He quickly raised the demands he faced.
Tesla wants to start selling imported cars in India this year, but says India’s taxes are among the highest in the world. Reuters’ first report requesting a tax cut in July prompted protests from some local players that such a move would discourage investment in domestic manufacturing.
Tesla executives, including India’s policy maker Manuji Crana, in a private meeting last month accepted the company’s request from Modi’s executives and claimed the taxes were too high, elaborating the argument from four sources. The source said.
In a meeting at Modi’s office, Tesla said India’s duty structure would not make its business in India a “viable proposition”, according to a source.
India imposes a 60% import tax on electric vehicles below $40,000 and a 100% tariff on electric vehicles above $40,000. Analysts say Tesla cars at these rates could be too expensive for buyers and limit their sales.
Tesla also submitted a separate request for a meeting between its CEO Elon Musk and Modi, three sources said.
Modi’s office, Tesla, and its executive Klana did not respond to requests for comment.
It’s not clear what Modi’s office specifically told Tesla in response, but four sources said Reuters officials were divided on the demands from US automakers. Some executives want the company to commit to local manufacturing before considering import tax cuts.
The government also has a huge bearing on the impact on the local auto industry, sources said.
Indian companies such as Tata Motors, which recently raised $1 billion from investors including TPG to ramp up EV production locally, said concessioning Tesla would go against India’s plan to increase domestic EV production.
“If Tesla was the only EV maker, reducing the obligations would have worked, but there are others,” said a source with direct knowledge of the government’s views.
The transport minister said this month that Tesla should not sell Chinese-made cars in India, but instead manufacture them locally, but Tesla said it would like to test imported cars first.
“If Tesla succeeds in imported cars, it is very likely to have a factory in India,” Musk said on Twitter in July.
The Indian market for premium EVs is still in its infancy and the charging infrastructure is lacking. Of the 2.4 million cars sold in India last year, only 5,000 were electric cars.
A government official said easing Tesla’s limited-time obligations to pave the way for entry would attract more investment, while at the same time building an “Indian investor-friendly image and environment-friendly credit. It was “enhanced” can go.