India’s auto sector has expressed concerns over Tesla’s request for import duty reduction on electric cars. Leading manufacturers have said that Elon Musk’s pitch to the Indian government runs contrary to the central government’s localisation policy.
Sources say companies like Tata Motors and Maruti have demanded consistency in policy and localization criteria under the union government's Faster Adoption and Manufacturing of Electric Vehicle scheme. However, companies like Hyundai and Mercedes Benz have demanded a duty reduction on fully built imported cars.
Reuters reports that Tesla has requested the Indian government for a 40 percent import duty cut. Currently, cars imported as completely built units or CBU’s attract a custom duty of 60 percent if under $40,000 and 100 percent if they cost more than $40,000. According to some Indian industry estimates the Tesla Model 3 which is set to be launched in India could cost around Rs 80 lakh or a little over $100,000. Last week Tesla CEO Elon Musk had tweeted about India’s import duties being the highest in the world for any large country. “We are hopeful that there will be at least a temporary tariff relief for electric vehicles. That would be much appreciated”, said Musk on twitter.
RC Bhargava, Chairman, Maruti Suzuki expressed doubts about Elon Musk’s proposal as Tesla is yet to even declare the pricing structure for the Indian market. “Without knowing the price at which Tesla is looking to bring its product to the Indian market it is very difficult to comment on the usefulness of the proposal submitted by Tesla. There is also no clarity if and when Tesla will manufacture in India ”, said Bhargava to CNBC-TV18.
The Society of Indian Automobile Manufacturers has said that it would be unfair to grant an import duty reduction to Tesla after setting a high localization threshold for Indian industry. “For instance the government wants industry to achieve 60 percent localization of the Advanced Chemistry cell. A cell is a part of a battery which is a part of an EV car. It will be a major concern that some manufacturers have to localize 60 percent of the cell but others get import duty reduction on the whole car including the tyres and the seats”, said the automotive industry body.
Tata Motors CFO PB Balaji also urged the government to stick to the localization road map that it had laid out previously. Speaking to reporters after the company’s Q1 result, Balaji said, “I am sure the government will remain consistent to that particular philosophy and the principles of FAME II. This is what all of us are working towards".
However, not all Indian automobile manufacturers are on the same page. Hyundai India Managing Director SS Kim welcomes the idea of reduction of duties on completely built units. Kim said that high cost of electric vehicles is still a deterrent to mass adoption and reduction in import duties on fully built cars will help in reducing prices and increasing the market for electric vehicles. Hyundai is not alone, German car makers for long have been urging the Indian government to consider a duty reduction on imported cars. Luxury car maker Mercedes Benz had also emphasized on the need for reduction in duties during the launch of its first full electric vehicle, the EQC in India.
Bhavish Aggarwal, the Co-Founder and CEO of Ola tweeted to say that he strongly disagrees with both Tesla and Hyundai on import duties. “Strongly disagree with both. Let’s have confidence in our ability to build indigenously and also attract global OEMs to build in India, not just import. We won’t be the first country to do so”, he said.
According to reports, the Indian government may consider a duty reduction if Tesla decides to manufacture in India. However, sources have said that any such move would be for the entire sector and not for a company, but clearly many in the Indian automotive industry are worried about differential treatment and concessions for Tesla.