Explained: Why Tesla’s tax break proposal didn’t find favor with the government

The government has refused a proposal for tax breaks by US company Tesla Inc., given the lack of a cohesive plan by the electric vehicle maker for domestic car manufacturing. Senior government officials said the view was taken as the automaker demands a tax cut only for importing cars into the country with fully assembled units, without any immediate or firm proposal to create a domestic manufacturing plant in India.

Why was the import duty reduction proposal not accepted for Tesla by India?

Senior government officials have said The Indian Express that the company in its proposal did not detail any configuration for the manufacture of electric vehicles. The government’s main concern was that the company would seek duty reductions and then offer domestic manufacturing conditional on domestic sales response. The request for a tax reduction was therefore not favorable because it was also felt that other companies could request similar concessions.

“Tesla wants tariff reductions for imports. They are welcome to come and produce. But his argument is first that I want to see how many people in India are buying my vehicle. For that he needs a reduced customs duty…if there is enough turnover, I could come. This is not a poor man’s car. They are not producing a small EV equivalent for the middle class. They are producing a car “super class. Why should we grant customs exemption? If you can afford it, please pay the duty and take it,” a senior government official said. The Indian Express.

What was Tesla’s proposal to reduce import duties? How have state governments responded?

Tesla had written to government departments last year asking for reduced import duties on fully assembled cars.

Currently, duties ranging from 60-100% are levied on cars imported as Completely Built Units (CBUs), depending on engine size and value of cost, insurance and freight (CIF) less or more than $40,000.

Last month, following Tesla founder Elon Musk’s tweet that challenges with the Indian government were proving to be an impediment to the launch of Tesla’s electric cars in India, several state government officials invited the billionaire to settle in their respective territories.

Responding to a Twitter user asking for the launch of Tesla vehicles in India, Musk tweeted on January 13, “Still overcoming many challenges with the government.”

The following day, Telangana Cabinet Minister KT Rama Rao also tweeted, “Hey Elon, I am the Minister of Industry and Commerce for Telangana State in India. Will be happy to partner with Tesla to address installation challenges in India/Telangana. Our state is a champion of sustainable development initiatives and a premier business destination in India.”

On the same day, West Bengal’s Minister of State for Minority Affairs and Madrasah Education tweeted, “Come here, we in West Bengal have the best infra and our leader @MamataOfficial has the vision. Bengal means business…”

The next day, Maharashtra Cabinet Minister Jayant Patil, also quoting Musk on Twitter, wrote: “Maharashtra is one of the most progressive states in India. We will provide all necessary assistance from Maharashtra for you to establish yourself in India. We invite you to establish your manufacturing plant in Maharashtra”.

The deluge of states reaching out to Musk ended with the Punjab Pradesh Congress Committee and Punjab MP Navjot Singh Sidhu writing on Twitter: “I invite @elonmusk, Punjab Model will create Ludhiana as hub for the electric vehicle and battery industry with time-limited one-stop clearance for investment that brings new technologies to Punjab, creates green jobs, environmental conservation and sustainable development pathway”.

Newsletter | Click to get the best explainers of the day delivered to your inbox

Comments are closed.