The Government of India is about to finalise a policy on the concessions on import duties on EVs in India, that cost over Rs 30 lakhs. Elon Musk was willing to to invest up to $2 billion in a Tesla factory in India, if the Indian government reduced the import duty it levies

Tesla, the prominent US-based electric automaker, may soon establish its presence in India, with the government nearing the finalisation of a policy to extend concessional import duties on electric cars valued above Rs 30 lakh (approximately $36,000) for 2-3 years, suggests a report by The Economic Times.

Sources familiar with the matter disclosed that the reduced import duties could be provided by the Indian government in exchange for bank guarantees from Tesla, which intends to invest in constructing an electric vehicle factory within the country.

Tesla has expressed its willingness to invest up to $2 billion if the Indian government offers a reduced import duty of 15 per cent on imported electric cars during the initial two years of operations.

The government is reportedly exploring the option of temporarily reducing import duties based on bank guarantees, aiming to incentivize foreign automakers to expedite plans for local manufacturing.

This move is expected to stimulate employment opportunities and drive down the prices of electric vehicles through increased localization.

According to sources, the exact quantum of the bank guarantee has not yet been determined, but it is envisioned as a mechanism to ensure timely investments and the establishment of local factories by companies.

Bank guarantees would be encashed in case of non-compliance with specified timelines for investment.

In response to the potential relaxation of import duties for Tesla, Indian automakers are adopting a cautious stance, opting to observe developments before taking any decisive actions.

A senior industry executive, preferring anonymity, acknowledged that while the industry has not formally raised objections with the government, several car manufacturers are apprehensive about the possibility of reduced import duties granting an unfair advantage to Tesla, particularly as the company has yet to firm up its investment plans.

Last month, Anish Shah, Managing Director of Mahindra & Mahindra (M&M), reportedly emphasized the importance of nudging global EV makers to invest in India. Shah highlighted the need for a level playing field to bolster the domestic industry, emphasizing the significance of local manufacturing to prevent India from becoming solely reliant on imported products.

These developments underscore Tesla’s imminent entry into the Indian market and the potential implications of policy changes on the domestic automotive landscape.

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