US automaker Tesla has run into a roadblock for its plan to import cars to India on duty concessions as the ministry of heavy industries told the auto giant that the government does not favour a reduction in duties based only on an “intent to invest”.
The government has suggested that the Tesla should begin its India business by starting with local assembly operations, and thereafter scaling it to full-fledged manufacturing.
Offering duty concessions when someone will consider investing after two-three years will be a reversal of a policy that the Centre has followed for several years, and will be unfair to existing players, a government source told TOI. Lower tariffs cannot be offered only to one company, they added.
The government fears that an industry-wide cut in customs duty will result in import of EVs instead of companies — such as Ola — setting up manufacturing facilities.
Tesla executives have been told that they should consider importing semi-knocked down (SKD) kits into India and assemble them locally to attract lower duties instead of importing completely built units.
Tesla has told the government that it is already sourcing components from the country for its global supply chain and proposes to scale it up.
Elon Musk recently pitched for duty cuts in India as the company prepares to start sales . “We are hopeful that there will be at least a temporary tariff relief for electric vehicles. That would be much appreciated,” he tweeted.
Though several agencies such as NITI Aayog and the transport ministry also back a cut in duties, without support from the heavy industries ministry, the move is unlikely to go through.
India maintains over 100% duty on imported vehicles as part of a strategy to encourage companies to manufacture domestically, a strategy that has seen several car makers set up shop in the country.
It wants to adopt a similar strategy for EVs, with some officials arguing that government’s stand against offering similar concessions to Apple a few years ago resulted in iPhone maker getting its vendors to set up manufacturing facilities in the country.
Source: Economic Times
