For imported electric vehicles (EVs) with a value of less
than $40,000 - including the car's cost, insurance and freight - the government
is discussing slashing the tax rate to 40% from 60% presently, the officials
told Reuters.
For EVs valued at more than $40,000, it is looking at
cutting the rate to 60% from 100%, they said.
"We haven't firmed up the reduction in duties yet, but
there are discussions that are ongoing," one of the officials said.
India is the world's fifth-largest car market with annual
sales of about 3 million vehicles but the majority of cars sold are priced
below $20,000. EVs make up a fraction of the total and luxury EV sales are
negligible, according to industry estimates.
Tesla, in its pitch to the government - first reported by
Reuters in July, argued that lowering import duties on EVs to 40% would make
them more affordable and boost sales. This triggered a rare public debate among
automakers over whether such a move would contradict India's push to increase
domestic manufacturing.
Even so, the government is in favour of a cut if it can see
companies such as Tesla providing some benefit to the domestic economy -
manufacture locally, for example, or give a firm timeline on when it would be
able to, one of the officials said.
"Reducing import duties is not a problem as not many
EVs are imported in the country. But we need some economic gain out of that. We
also have to balance the concerns of the domestic players," the official
said.
Tesla CEO Elon Musk said on Twitter last month that a local
factory in India was "quite likely" if the company was successful
with vehicle imports but taxes on them are high.
The second official said that since the duty cut is being
considered only for EVs and not other categories of imported cars, it should
not be a concern for domestic automakers - that mainly manufacture affordable
gasoline-powered cars.
India's finance and commerce ministries, as well as its
federal think tank Niti Aayog, chaired by Prime Minister Narendra Modi, are
discussing the proposal and all stakeholders will be consulted, the person
added.
Both sources did not want to be identified as the
discussions are still private.
India's commerce and finance ministries as well as Niti
Aayog did not immediately provide comment.
Automakers including Daimler's Mercedes-Benz and Audi have
for years lobbied for lower import duties on luxury cars but faced strong
resistance mainly from domestic companies. As a result, India's luxury car
market has remained small with average sales of around 35,000 vehicles a year.
Tesla's cars would fall into the high-end EV category, which
are mainly imported into India and account for a much smaller percentage of
sales. Mercedes, Jaguar Land Rover and Audi sell imported luxury EVs in the
country.
This time Tesla's demands have found support from Mercedes
as well as South Korean automaker Hyundai Motor, which has around an 18% share
of India's car market.
Opposing the proposed cut are Tata Motors, which produces
affordable electric cars in the country, and Softbank Group-backed Ola, which
is making electric scooters in India.
A third source familiar with the government's thinking said
there was awareness that a brand such as Tesla can make electric cars more
penetrable in India, which is lagging other major auto markets in EV sales.
The government is thinking about the best way to approach
this and they want to see some benefit even if that only means Tesla pledges to
source parts domestically, the person said.