Tesla’s entry into the Indian market is on shaky grounds again as the government says that a deal on import duties for electric vehicles is off the table.
India has the biggest auto market that Tesla has yet to enter. There has been a ton of back and forth between the Indian government and Tesla to make it happen, but the negotiations have been more difficult than usual.
The Indian government wants Tesla to build a factory in the country in order for them to enter the market, but the automaker prefers to first test the waters with imported vehicles.
However, India has strong EV import duties that prevent that.
In 2021, Tesla officially incorporated an Indian company in Bengaluru, the capital of India’s southern Karnataka state. During the summer, Indian government officials said that they are considering Tesla’s proposal to greatly reduce import duties for electric cars.
Later that year, Tesla vehicles were spotted being tested on Indian roads, and the company got seven electric vehicle variants approved in the country.
However, the company wasn’t able to come to a deal on import tariffs, and in 2022, Tesla decided to put its plans to enter the Indian market on hold.
Over the last year, there has been a renewed effort for Tesla to enter the market, and the company has engaged with the government in new negotiations.
Last month, we learned that India was again considering a special deal with Tesla to reduce the import duties. A few weeks later, we learned that Tesla is reportedly closing in on a $2 billion deal to build a factory in India.
Top comment by Ian Ollmann
This is standard India. The government wants India made, not Chinese imports. It’s going to be tough to bootstrap a whole auto manufacturing business top to bottom there, especially when the Indian consumer is so price conscious. Tesla will need to do the math on this, but unless the India production is primarily for export, my expectation is they will decide that the volume is too low and heavy tariffs are good enough for the occasional wealthy Tesla fan.
It appeared that with the promise of building a factory in the country, Tesla would be able to secure an exemption on the import duties for its electric vehicles and start establishing a market ahead of the start of production at the new factory.
However, such a deal appears to be off the table.
Som Parkash, junior minister of the Ministry of Commerce and Industry, told parliament late Wednesday (via Bloomberg):
Presently, there is no proposal either to provide an exemption from local value addition cost or to provide a subsidy on the import duty on electric vehicles in India.
It’s unclear if this is going to affect Tesla’s plan to build a factory in the country, but the automaker has made it clear that it would prefer importing vehicles in the market before establishing local manufacturing.
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