Billionaire Musk wants Tesla on Indian road, high taxes a major hurdle

| Updated: July 24, 2021 1:16 pm

Tesla Inc is eyeing Indian grounds to set up a factory, only if taxes don’t play a spoilsport. Chief Executive Elon Musk took to Twitter and expressed his thoughts when quizzed on launching Tesla cars in India. The company has written to Indian ministries seeking a reduction in import duties on electric vehicles (EV).

Second richest on the planet Elon Musk is the pioneer in battery-charged or EV in the world. His company Tesla is actively exploring to launch these EVs in India, the world’s fifth-largest car market. The wait seems to be over and by the end of 2021, as we may see Tesla cars zooming on Indian roads.

Currently, Musk is disappointed at the high taxes levied on EV. Even if the arrive on Indian roads, it may remain out of reach for most Indian customers who are already paying record-high fuel prices.

But the excitement is gaining momentum as the company has just included Hindi as one of the languages on the user interface of its car’s infotainment system. A few hours back, the billionaire in a reply to an enthusiast’s Tweet said, “We want to do so, but import duties are the highest in the world by far of any large country.” Musk was replying to a question where an individual requested him to launch Tesla in India, as soon as possible.

Higher duties, poor charging infrastructure and treatment of vehicles on par with conventional vehicles are some of the other speed breakers, working against the launch or introduction of Tesla EV in India.

Currently, India charges 60 per cent duties on cars priced below $40,000 and 100 per cent duties for those priced above $40,000 (Rs 29,60,000). On top of it, the vehicle will also attract a GST of five per cent on sales in India.

As per a news report in Reuters, Tesla has already written to the Indian government on lowering the duties. “But we are hopeful that there will be at least a temporary tariff relief for electric vehicles,” Musk added in reply to a Tweet.

Tesla is pitching for import duties around 40 per cent of fully assembled electric cars.

Building up its base in India

Meanwhile, Tesla is slowly building its presence in India. It has registered a subsidiary named – Tesla India Motors And Energy Private Limited – in Bangalore, the IT and innovation hub of the country. An individual named David Jon Feinstein is one of the directors and he is the global senior director at Tesla. It is assumed that David is going to play a key role in Tesla’s market access in India.

There are also reports that eventually Tesla will set up an assembly line in India. It is exploring the land for the plant. Gujarat, Karnataka and Maharashtra have offered state support but the deal is not finalized yet.

Play of price

With petrol and diesel prices soaring at a record high in India, commuters are looking at cheaper options. One of the emerging alternatives is EV. Newer technologies and efficient batteries are now competing with cars that run on conventional fuels. In the United States, EV vehicles sales are rising. From 5.4 lakh EV vehicles in 2015, the total sales ended with 29 lakh units in 2020. Even the share in the total vehicle has increased to 4.6 per cent.

However, the EV market is in a nascent stage in India. There are a few alternatives available from Tata, Mahindra, Hyundai and MG but the supercars still remain unaffordable.

Options before Tesla: CBU or SKD?

Other than building a local manufacturing unit, with domestic parts and workers, Tesla has two options to enter India. One of them is importing a completely built unit (CBU). The import duty on the CBU – as the entire car is manufactured outside India and imported in a ship as a single unit – is highest to boost local manufacturing. For CBU, Tesla will have to pay 100 per cent duty for a car priced above $40,000 and 60 per cent for those below it.

Tesla has currently 14 models and only two priced below $40,000. As per industry estimates these two models – considering all duties and handling charges – will be priced between Rs 45 to Rs 55 lacs.

The other option is semi-knocked down (SKD) units’ imports. Here, cars are imported in parts and assembled in India. The import duty for the option is half of the CBU. This will reduce the car prices to Rs 39 to Rs 45 lacs in India. These knocked-down units will require an assembly facility that Tesla does not have.

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