To court Tesla, India is considering a five-year tax break on EV imports

 To court Tesla, India is considering a five-year tax break on EV imports

According to persons with knowledge of the situation, the Indian government is developing an electric vehicle policy that would let foreign automakers to import battery-powered cars at reduced tax rates if they agreed to ultimately construct them in India.

India is thinking of lowering import taxes on fully assembled electric vehicle units for a maximum of five years in an effort to get companies like Tesla Inc. to market and ultimately produce their vehicles there.

According to persons with knowledge of the situation, the Indian government is developing an electric vehicle policy that would let foreign automakers to import battery-powered cars at reduced tax rates if they agreed to ultimately construct them in India.

The persons, who wished to remain anonymous since the talks are confidential, said that a final decision about the policy's parameters has not yet been made. Emails requesting comment from the heavy industries and commerce ministries in India were not immediately answered by spokespeople.

The Austin, Texas-based EV maker has requested a reduction in import duties on electric cars in 2021. It hoped that the rates, which vary from 70% to 100% depending on the import value of the car, would be lowered to 40%.

Elon Musk, the CEO of Tesla, is scheduled to meet with Indian Trade Minister Piyush Goyal later this week to talk about the company's intentions to establish a plant in the country of South Asia. Goyal is in San Francisco for the Asia-Pacific Economic Cooperation and the Indo-Pacific Economic Framework ministerial meetings.

As the nation's middle class grows, so does the desire for electric cars, making this one of the world's most promising auto markets for Tesla. In addition to generating employment, Tesla's investment would support India's government's efforts to raise the manufacturing sector's percentage of the GDP.

Only 1.3% of all passenger vehicles sold in India last year were electric cars (EVs), indicating that the country's electric car business is still in its infancy, according to BloombergNEF. shortage of alternatives, high automobile costs, and a shortage of charging facilities have all hindered the country's adoption of EVs.

In a nation where the air is now the most polluted in the world, opening up the EV market might hasten the adoption of greener transportation. In order to increase domestic EV manufacturing, the government introduced a $3.1 billion incentive scheme in 2021.

As part of talks with Britain over a free-trade agreement, India is also thinking about lowering import levies on certain electric cars from the UK.