Express Drives had earlier reported that the Indian Government is working on the import tariffs for electric vehicles and will provide some relief on the duties. A report by Reuters has revealed that the government will go ahead with the slash of import duties.
Currently, the import duties levied by India are 110%. Based on Reuters’ sources, the government has rejected the domestic automakers’ request to postpone the cut in import duties and switched focus to letting global players enter the Indian market. Needless to say, the reduction in tariffs will play in Tesla’s favour.
Is this bad news for Make-in-India players?
The reduction in import tariffs will be a blow for domestic players like Tata Motors and Mahindra. According to Reuters, the Indian companies had requested the government to delay the decision, but, this was rejected as officials closely monitoring the bilateral trade negotiations between the two nations. The report does not reveal the actual cut on EV tariffs, but it is expected to be a significant one.
The local EV players have plenty to lose as they have invested a lot in manufacturing facilities. The EV sector in India is still at a nascent stage at 2.5% of the total market and the government believes that an import tariff cut will accelerate EV penetration to 30% by 2030. Local companies are fine with lowering import duties on internal combustion engine vehicles.
According to a report by Kotak Institutional Equities on Automobiles & Components: EV policy overhaul — the government is expected to come up with a revised EV policy to encourage global OEM participation, given no takers for the existing policy. While we await the fine print of the revised policy, we believe that there will be limited impact on the existing listed OEMs’ sales if the government keeps the floor for imported cars at US$35k. However, if the government removes the restriction on the floor price, the EV PV segment can witness increased competitive intensity. Affordable Tesla Model 2 (potential launch in CY2025E) can disrupt the domestic EV market and accelerate EV adoption.
A win for Tesla?
Tesla has already revealed its initial India plans as the EVs will be directly imported from Berlin, Germany. The cut in import tariffs will be a big boost for the Elon Musk-led company as reports suggest it wants to introduce an EV under Rs 25 lakh. Currently, Model 3 is Tesla’s most affordable vehicle, which costs over Rs 30 lakh. Recently, Tesla has been mulling over introducing a cheaper version of the Model Y, which could be 20% more affordable than the current version in the market. The only catch is that it is expected to be manufactured in its Shanghai plant.
