Tesla Puts India Plans On Hold After Getting Rejected For Relaxed Import Duty

Last Updated on May 20, 2022 by Anu Joy

Tesla has officially put their growth plans for India on hold after months of wrangling with the government about finding a common ground to introduce Tesla cars at subsidised rates to India. According to Reuters, Tesla has given up on its search for showroom and service space in India and has restructured its domestic workforce.

In January 2021, Tesla Motors registered its R&D office in Bengaluru as Tesla Motors India & Energy Pvt Ltd. Following the registration, some Model 3 and Model Y units were shipped to India for local testing. Tesla hoped to introduce their first electric vehicle in the Indian market as early as Q1 2021, with the first batch arriving as CBUs. After assessing the demand, this would have been followed by local manufacturing.

However, things didn’t go too smoothly for the company, as the government refused to ease import tariffs, which are now equal to 100 percent of the car value on vehicles costing more than $40,000 regardless of fuel type. Tesla hoped to reduce this to 40 percent so that CBU units could be a viable business model in the country. This demand raised some eyebrows in the auto sector, with international players such as Hyundai supporting it and domestic players such as Mahindra opposing it.

Following this, the Indian government was quick to issue a statement recommending increased local manufacturing and promotion of the “Make in India” initiative. While the central government refused to soften their stance, states such as Tamil Nadu and Telangana attempted to entice the American automaker with incentives in exchange for bringing production to the two states. According to the report, Tesla set a deadline of February 1 when India unveiled its FY 2022-2023 budget. Based on the results of the budget, the company would determine if its lobbying had resulted in any changes to the tax structure in their favour.

After seeing no change in the tax structure, Tesla India discontinued all further efforts to campaign for a tax adjustment. Moreover, it has also suspended plans to search for spaces in key Indian cities for showrooms and service centres.