India lowers import tax on EVs to lure players like Tesla

India slashed the import duty on electric vehicles (EVs) for global companies that commit to setting up local factories as the country seeks to appeal to international players like Tesla Inc ahead of national polls.

To get tax concessions, companies will have to invest at least 41.5 billion rupees (RM2.36 billion) and start producing EVs from a local plant within three years, the Ministry of Commerce & Industry said in a statement Friday.

Any imported electric cars priced from US$35,000 will attract a reduced tax of 15% for five years, it said. Only 40,000 electric cars in total and 8,000 annually can be imported by companies that pledge investment of more than US$800 million, the ministry said.

It’s a welcoming move for US EV maker Tesla, which has been in dialogue with India for many years but the country’s high tax regime has prevented it from selling cars in the nation, something chief executive officer Elon Musk has pointed out. For Tesla, breaking into the world’s most-populous nation, where aspirational middle-class consumers are taking to EVs, would be a potential boon.

Musk last year said Tesla will make a “significant investment” in India and he intends to visit the country in 2024. He also sees potential in the country for sustainable power generation through solar and wind, and energy storage in stationary batteries.

Investments from global firms could spur India’s switch to electric cars, which made up just 2.3% of the total passenger vehicles sold last year, according to BloombergNEF. While the demand for electric scooters is rising in the country, consumers have been slow to buy battery-powered cars because they’re expensive and the charging infrastructure is limited.

Bloomberg News in November reported that the government is considering tax cuts on imports of completely built units of EVs for a period of up to five years.