A reduction in import duty on electric vehicles may be on the cards as India and the US discuss a bilateral trade deal.
Reuters reported, quoting government sources, that the Centre is mulling opening up the sector by lowering import duty. However, the quantum of duty cut under consideration has not been revealed amid ongoing negotiations with Washington.
A tariff reduction would be a win for Tesla, which is reportedly set to launch showrooms in Mumbai and New Delhi this year. Trump has previously argued that Tesla faces unfair barriers to entry in India, as current regulations would require it to build a local factory.
Analysts said the move would benefit US auto maker Tesla to enter the growing EV market in India. But the impact on domestic auto makers like Tata Motors and Mahindra and Mahindra is likely to be fairly limited in the early stages till the time the US car maker explores manufacturing possibilities.
“Given Elon Musk’s close relationship with President Trump, this would go down very well and could also bring concessions from the American side,” Emkay Global said in a report.
According to Vahan registration data, EVs made up just 2.5-3 per cent of total passenger vehicle registrations over the past year. Within this, there are only six models (of 16 total models launched/announced) priced at ₹30 lakh plus.
“This shows that Tesla’s entry would not disrupt the vast majority of the domestic passenger vehicle and electric vehicle market initially. It is only when Tesla can manufacture locally and bring costs down that it would pose a significant threat to domestic passenger vehicle makers, but that is at least a couple of years away, given the time needed to set up and scale domestic manufacturing units,” said Emkay Global.
Earlier in March, the Union ministry of heavy industries notified a scheme to promote the manufacturing of electric vehicles in India, offering incentives to companies looking at a minimum investment of $500 million in the country to make electric four-wheelers.
Subject to conditions, the scheme also offers a reduced customs duty of 15 per cent on the import of completely built units of electric four-wheelers.