India wants Tesla to buy $500-mn local auto parts for tax break: Report


Table of Contents

Inc. would need to commit to sourcing at least $500 million of auto components from India for the electric carmaker’s request for an import tax cut on its vehicles to be considered, a person familiar with the government’s thinking said.

While it could start at a lower base, would need to agree to ramp up Indian parts purchases by around 10% to 15% a year until a satisfactory level was achieved, the person said, asking not to be identified because the discussions are private. The administration of Prime Minister has formally told to ramp up domestic sourcing, but is yet to relay a procurement target to the company, the person said. Tesla in August claimed it sourced around $100 million in parts from India.

The government has said it is keen for the EV pioneer to make cars in the country, but appears to be using their interest to try and gain benefits for the nascent local electric car industry. Tesla says it wants to test the waters by selling imported cars first, and to make that viable, levies as high as 100% would need to be lowered. India is still a value-conscious auto market dominated by cheaper gasoline cars and clean transport remains a fledgling industry, with EVs just 1% of cars sold annually.

To progress on its tax-cut bid, Tesla must approach the government with a component-sourcing plan that’s proportional to its car sales forecast in India, the person said. It should also export made-in-India components to China if it plans to import cars from there, the person said.

Tesla and a representative for India’s ministry of transport didn’t immediately respond to requests for comment.

In July, Tesla CEO tweeted that import levies in India were among the highest in the world and that the nation treats clean-energy vehicles the same as gas-guzzling cars, which isn’t consistent with its goal of reaching carbon neutrality. India has been engaged in a long-time border dispute with neighbor China and last year asked Tesla to avoid selling cars made at its Shanghai factory in India, according to Road Transport Minister Nitin Gadkari.

India earlier this month rejected Tesla’s call for lower taxes to import electric cars, saying existing rules already allow partially-built vehicles to be brought in and then assembled locally at a cheaper levy. Imported EVs attract taxes of as much as 100%, while there are import duties of between 15% to 30% on parts shipped for assembly in the nation.

While Tesla is facing an impasse with the federal government, other Indian states are courting the carmaker, promising a streamlined approval process. At least five states have pitched for Tesla to set up manufacturing plant in their provinces.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor


Source link