Contrary to speculations, the US electric carmaker did not announce its entry into the Indian EV market during the Vibrant Gujarat 2024 summit, as the final call had yet to be taken, pending the government’s decision on the tax break

The wait for Tesla’s electric vehicles (EVs) in India may soon be over for luxury car buyers. Reports indicate that the Indian government is finalizing a policy to meet Elon Musk’s conditions for bringing his car brand to the country: offering a reduced import duty on cars valued over $40,000 (about Rs 33 lakh) for the first 2-3 years of Tesla’s operations in India.

This reduction in import duty is contingent upon Tesla committing to invest USD 2 billion in building an EV manufacturing plant in India, backed by a bank guarantee.

Despite speculation, Tesla did not confirm its entry into the Indian EV market during the Vibrant Gujarat 2024 summit. The final decision awaited the government’s stance on the proposed tax break.

Under the current policy, India imposes a 100 percent import duty on cars valued over USD 40,000 and a 60 percent import duty on vehicles below this threshold. Tesla has expressed interest in entering the Indian EV market and investing USD 2 billion in the country if the import duty is reduced to 15 percent for the first two years.

The government is reportedly considering Tesla’s request for temporary concessional import duties, subject to bank guarantees. These guarantees serve as insurance, allowing funds to be encashed if Tesla fails to meet its investment commitments.

Domestic electric vehicle manufacturers, such as Mahindra, Tata, and Ola Electric, currently dominate the Indian market. They have advocated for a level playing field, expressing concerns about potential advantages granted to Tesla.

Mahindra & Mahindra has engaged with government officials, emphasizing the importance of fostering domestic manufacturing and ensuring fairness in the market. Ola CEO Bhavish Aggarwal has also opposed importing electric cars from foreign competitors, warning that offering incentives to international firms like Tesla could negatively impact sales for domestic players.