There are now indications of revived activity after the Union Government categorically rejected a request for import tax reductions from the US-based Tesla Inc. and the Texas-based electric vehicle manufacturer pushed forward to shelve its India debut plans back in mid-2022.
Although the specifics are still unknown, it is evident that Tesla appears to have signalled a shift in position by abandoning its demand for an immediate reduction in import duties as a prerequisite to contemplating manufacturing in India. Additionally, a team from Tesla, including some of its US supply chain leaders, is now in India and has met with important nodal union ministries.
According to a representative of one of the nodal ministries overseeing the case, the government’s stance on the reductions in import duties has not altered. If there is any shift at all, it is on Tesla’s side because the business now appears open to talking about manufacturing in India without making the reduction of import duties a requirement. Additionally, there is a chance that the government may take into account various perks that could encourage phased manufacturing if the manufacturer of electric vehicles presents a convincing strategy for domestic car manufacturing.
Depending on the domestic production plan, this can also entail certain duty discounts. Along with other discounts, the offer can include certain adjustments to the PLI programme.
Senior government officials claimed that the automaker’s earlier request for a duty reduction was considered as a prerequisite, and only for importing cars into the nation as fully completed ones, without any urgent or solid commitment to establish a domestic manufacturing facility in India.
According to a government official, the consensus back then and now is that any reduction in import duties must be extended to everyone as a whole, rather than making special accommodations for one party. Given that India is presently negotiating free trade agreements with other nations and trading blocs, notably the European Union and the UK, who have a vibrant automotive industry, and that these negotiations include a desire for lower import duties, this is even more important.
Tesla had written to specific government ministries in 2021 asking for a decrease in import taxes on fully completed automobiles. Cars imported as completely built units (CBUs) are currently subject to customs duties ranging from 60% to 100%, depending on the engine size and price, insurance and freight (CIF) value below or above $40,000, and other factors. The duty is 100% for vehicles costing $40,000 or more, and it is 70% for vehicles costing less. Tesla had requested a reduction in these taxes to 40% or less.
Elon Musk, the founder of Tesla, claimed in a tweet at the beginning of last year that difficulties with the Indian government were impeding the introduction of Tesla’s electric vehicles in India. In response, a number of state government representatives lined up with invitations for the billionaire to open up shop in their respective regions.
Several states reacted to Elon Musk’s post from January 13 of last year, in which the businessman stated: “Still working through a lot of challenges with the government” in response to a Twitter user who requested that Tesla automobiles be introduced in India. The following day, Telangana Cabinet Minister KT Rama Rao tweeted: “Hey Elon, I’m Telangana State’s Industry & Commerce Minister. We are excited to collaborate with Tesla to overcome the obstacles to opening an office in India/Telangana. Our state is a leader in sustainable development efforts and a premier business hub in India.
“Drop here, we in West Bengal have the best infrastructure and our leader @MamataOfficial has the vision,” West Bengal’s Minister of State for Minority Affairs & Madrasah Education tweeted the same day. Bengal is Serious Business. In response to Musk’s post, officials in Punjab and Maharashtra also requested investments from the firm for their respective territories.
Technically speaking, Tesla India Motors And Energy Private Limited is a subsidiary of a foreign firm and was established in January 2021 as a private company. It is registered with the RoC in Bangalore and has a paid-up capital of 35 crore rupees and an approved share capital of 50 crore rupees. According to RoC documents, the company’s India director, Prashanth Ramanathan Menon, and David Jon Feinstein are directors.
