India opens the doors to Tesla with new scheme to wave EV import duties

India is finally opening its doors to Tesla, and other EV automakers, with a new program to wave the country’s high import duties for electric vehicles.

But there are conditions.

India is the world’s biggest automotive market where Tesla has yet to operate.

The automaker has been negotiating with the country for years in order to find a way to avoid its high import duties on new vehicles.

On a few occasions since 2021, it looked like they would come to terms, but it never went through.

Tesla wants to use its usual approach of first importing its electric vehicles from its foreign factories and build out the new market with service centres and Superchargers, but that’s not possible with the country’s high import duties on new cars.

India has been insisting that Tesla would instead build a factory in the country.

Over the last year, there appear to be some significant progress toward a compromise.

Last year, CEO Elon Musk met with Prime Minister Narendra Modi in the US, and after the meeting, the CEO said that Tesla would be making an investment in India “as soon as humanly possible.”

Now, the government has announced a new program that would open the doors for the deal. They wrote in a press release:

The Union Government has approved a scheme to promote India as a manufacturing destination so that e-vehicles (EV) with the latest technology can be manufactured in the country. The policy is designed to attract investments in the e-vehicle space by reputed global EV manufacturers.

The “scheme” allow EV manufacturers access lower 15% import duties on EVs valued “$35,000 USD or above for a total period of 5 years”, but they are 3 main requirements for companies to take advantage of deal

• They need to make a minimum investment of Rs 4150 Cr (~$500 million USD)
• Set up an EV manufacturing facility in India within 3 years with a localization level of 25% by the 3rd year and 50% by the 5th year
• Automakers taking advantage of this deal are limited to 40,000 total imported EVs at lower tarifs and no more than 8,000 units per years

A recent report from India said that Tesla and the country’s government were close to a deal that would include Tesla building its cheaper next-gen electric vehicle in the country.

Tesla has been signaling a potential new factory location announcement by the end of the year.

Electrek’s Take

This seems like a reasonable compromise. Tesla could start importing Model 3 and Model Y – justifying an investment in service and charging infrastructure while they set up a factory over the course of 3 years.

I don’t know if Tesla is going to go for it, but it seems likely considering all the negotiations that happened over the last few years.

A max of 40,000 units is a bit limiting though.