India is reportedly considering Tesla’s proposal to greatly reduce import duties for electric cars, which would enable the automaker to finally enter the market.

Tesla has been talking about entering the Indian market for years, but regulations have slowed down their efforts.

The country is extremely protective of its domestic auto manufacturing and enforces high import duties that almost double the cost of imported vehicles in the market.

Over the last year, the automaker has been making some moves in India, and local government officials have revealed talks with Tesla executives.

Earlier this year, Tesla officially incorporated an Indian company in Bengaluru, the capital of India’s southern Karnataka state.

There were indications that the automaker was looking into building a factory in the country, which would get around the import duties, but more recently, CEO Elon Musk said that he would prefer that Tesla proves a success with imported vehicles in the market before investing in a local manufacturing plant.

That has been Tesla’s approach in other market introductions, including in China, where it later built a large factory.

However, under the current import regulations, it would be hard for Tesla to find any success in the country and would put investments in service centers and charging stations at risk.

The automaker has been leading a lobbying effort for the government to reduce import duties on electric vehicles in order to remedy the situation.

Today, Reuters reports that the Indian government is seriously considering Tesla’s proposal:

India is considering slashing import duties on electric cars to as low as 40%, two senior government officials told Reuters, days after Tesla Inc’s appeals for a cut polarised the country’s auto industry.

That would be a significant drop from the current 60% rate, but it would only be for electric vehicles that cost less than $40,000, including insurance and freight.

For Tesla, it could mean that the automaker could only benefit from the lower import duties on its base Model 3 vehicle built in China.

But the proposal also includes dropping duties from 100% to 60% for EVs that cost more than $40,000.

An Indian official told Reuters:

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.

Both Daimler and Hyundai have backed Tesla’s proposal, but domestic manufacturers, including Tata Motors, are fighting against it

Electrek’s Take

We are still talking about significant 40-60% import duties here. It will not make Tesla’s, or any other imported EV, super competitive in the country.

But it could be enough for Tesla to build a small market in the country, deploy some service centers and Supercharger stations, and if successful enough, it could decide to build a local factory.

This is pretty much exactly what happened in China with Gigafactory Shanghai, which has been a great success for both Tesla and China.

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