Tesla effect: India deliberates import tax cut if EV makers build locally: Report

India is working on a new EV policy which would drastically reduce import taxes for automakers that commit to local manufacturing, following a proposal by Tesla, which is mulling entering the local market, Reuters has learned from sources. 

This policy would enable auto firms to fully import electric vehicles in the country at a 15% tax, versus the 100% tax that currently applies to cars that cost more than US$40,000 and 70% for the rest, two persons, one of which is a senior Indian government official, the newswire reported. 

The official told Reuters that "there was an understanding with Tesla's proposal and the government was evincing interest." 

The lower import taxes could help Tesla sell its full range of models in India, and not just the new car it wants to make locally, said a third source, Reuters reported. 

Neither Tesla nor India's commerce and finance ministers responded to the newswire's requests for comments.

More recently, Tesla has told Indian officials it is keen to set up a local factory and make a new EV priced in the range of $24,000, around 25% cheaper than its current entry model, for both the Indian market and export, the newswire said. 

For India plans, Tesla's senior public policy and business development executive Rohan Patel has in recent weeks met top officials privately. Prime Minister Narendra Modi, who held talks with CEO Elon Musk in June, has been tracking progress closely, Reuters has reported.

Indian officials have conveyed there will be no special incentives for Tesla's market entry, and the proposal for a low import tax, conditional on a manufacturing commitment, was touted by Tesla to keep both sides happy, the sources said.

Still, New Delhi is going to move slowly in considering the policy proposal as any lowering of taxes on imported EVs could disrupt the market and upset local players like Tata Motors and Mahindra and Mahindra that are investing to build electric cars at home.

"This is going to go through a lot of deliberations even though the government is keen on getting Tesla. That's because of the impact on domestic players," the Indian official said.