Four years ago, Elon Musk kicked off a vociferous debate in India’s auto industry when he said he wanted to come to India with the Tesla, but the stumbling block was the steep import duties, the highest in the world, which needed to go down substantially as a precondition to Tesla’s entry.
Domestic players such as Tata Motors and Mahindra & Mahindra opposed any move to reduce duties on fully-built cars. Tesla, though, had the support of other global players with manufacturing facilities in India: Hyundai, Volkswagen, BMW, and others who, too, pushed for lower duties so that they could garner scale.
Last week, the government tried a fine balancing act by announcing a new electric vehicle policy that sharply reduces customs duties on imported electric cars with a CIF (cost-insurance-freight) value of above $35,000, from 70-100 per cent to 15 per cent for five years, provided the manufacturer makes a minimum investment of $500 million in India within three years, and reaches domestic value addition of 25 per cent in the third year and 50 per cent in five years.
For the time being, at least, no one is opposing this, Says R C Bhargava, Chairman of Maruti Suzuki, India’s largest carmaker by far: “The government has put in enough safeguards to ensure the domestic industry does not face any real damage. By restricting the number of vehicles and allowing lower duty for cars with more than $ 35,000 CIF value…. The market for it is very small, where domestic players don’t have a presence.”
A spokesperson for M&M agrees: “The new EV policy reinforces the Make in India momentum, with requirements of bank guarantees, minimum investment commitment, and local value addition. This will accelerate the EV ecosystem in India.”
At present, India’s EV market at price points above $ 35,000 has six models, whose combined sales are in thousands. But that could change if a dozen high-end models come in, as is being expected from this year onwards.