Budget 2023: Imported EVs further out of reach as custom duty hiked to 70%

Customs duty on vehicles, including EVs in semi-Knocked down (SKD) form, will rise to 35% from 30%.

custom duty hike on imported cars

Finance Minister Nirmala Sitharaman has announced the Union Budget 2023-24 and for the automobile industry, it is a mixed bag. Fully imported cars including electric vehicles will become more expensive as a hike in customs duty is announced for completely built units (CBUs) costing less than Rs 32.7 lakh (USD 40,000) or with engine capacity less than 3,000 cc for petrol-run vehicles and less than 2,500 cc for diesel-run vehicles. It has been raised to 70% from 60%. 

Imported cars, EVs to be costlier, Tesla in India a distant dream 

Imported EVs and luxury cars manufactured outside India costing more than USD 40,000 in value will witness a 70% customs duty. So Tesla might not come to India anytime soon as its most affordable offering, the Model 3 is priced at around Rs. 36 lakh (USD 43,990). Customs duty on vehicles, including EVs in semi-Knocked down (SKD) form, will rise to 35% from 30%.

Santosh Iyer, Managing Director & CEO, Mercedes-Benz India said that the change in basic custom duties is going to impact the pricing of some select cars like the S-Class Maybach and select CBUs like GLB and EQB, making them dearer. However as Mercedes locally manufactures most of their models, this will not affect 95% of its portfolio.

“The Union Budget 2023 should drive demand as it focuses on boosting consumption by increasing the disposable income of taxpayers. Further, increased capital expenditure on infrastructure, particularly roads, should also create demand for the automotive sector,” he added.  

Vikram Pawah, President, BMW Group India says that the group welcomes the budget which is focused on long-term growth and comprehensive development. The relaxations for e-mobility production, announcements regarding the scrappage policy and National Green Hydrogen Mission will play an important role for a sustainable future. However, the increase in customs duty will impact sales of few of our models.

In a bid to promote local manufacturing, the Finance Minister has promoted the adoption of cleaner transport alternatives where the government has decided to exempt capital goods and machinery required to manufacture lithium-ion cells for batteries used in EVs. Custom duty on lithium-ion batteries has been reduced to 13% from 21% and the subsidies on EV batteries has been extended for another year.

Naveen Soni, President, Lexus India, one of the luxury brands that imports hybrid cars in India said that based on the increase in duties suggested in the Union Budget, we may have to adjust the prices of a few of our models. We hope to have better clarity once we study the overall impact of the same.”

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First published on: 01-02-2023 at 18:59 IST