Government of India slashes EV import tax to 15 percent, but there’s a catch

Ritesh Patil
In exchange, company required to invest minimum 500 million dollars (around Rs 4,145 crore) and set up a local manufacturing facility within 3 years

The Government of India has reduced the EV import tax to 15 percent. For reference, earlier manufacturer’s needed to pay around 70 percent or 100 percent import duties depending on the price of the vehicle, which made it difficult for new brands to enter the market.

This benefit comes with a condition that the manufacturer needs to commit a minimum investment of 500 million dollars (around Rs 4,150 crore) and build a local manufacturing facility within three years of setting up operations in India. The policy is effective immediately and the total EV imports will be capped at 40,000 units with a limit of 8,000 units per annum. The duty cut will be limited to the amount of investment made by the manufacturer or 800 million dollars (around Rs 6,484 crore), whichever is lower.

This is great news for Tesla, as the American carmaker has shown interest in entering the Indian market and even set up a factory if the government was willing to reduce the tax on EV imports. Even the Model 3, which is Tesla’s most affordable offering, costs 38,990 dollars (around Rs 32 lakh) in the US market, and hence will benefit from tax reduction. 

Recently, VinFast, a Vietnamese EV carmaker, started the construction of its manufacturing facility in Tamil Nadu and even announced plans to invest 2 billion dollars in the country. Meanwhile, now the carmaker can take benefit from this tax reduction and launch their products to familiarise us with them. 

Existing carmakers like Audi, BMW, Mercedes and even Kia who import some or all of their electric offerings in India can benefit from this tax reduction. We expect a few price revisions to be announced in the coming days. 

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