India Wants Tesla Sourcing Plans, Roadmap Before Considering Tax Breaks

In a meeting with Tesla Inc. earlier this month, the Indian government asked to see detailed sourcing plans and manufacturing roadmaps for the electric vehicle (EV) maker’s operations in the country before it considers granting Tesla any tax breaks — reports Bloomberg.

The information comes from a person with knowledge of the meeting between Tesla and India’s ministries of heavy industries and finance.

Tesla CEO Elon Musk has been keen on entering Asia’s third-largest economy for years now, but standing in his way were intimidating duties of up to 100% that would render Tesla’s EVs “unaffordable” if the company chose to import them like it does in Europe and other parts of Asia.

Late last year, an Indian official confirmed that Tesla would be coming to India in 2021. After India offered Tesla the lowest production costs in the world, Tesla quickly appointed a country director for its operations in India.

However, unreasonably high taxes still stood in Tesla’s way. The EV pioneer started lobbying the Indian government for lower import duties back in July, with a letter to Prime Minister Narendra Modi’s government asking for the import duty on EVs to be reduced from the current 60% to 100% to a flat 40%. Tesla also asked for the 10% social welfare surcharge to be shaved off.

After an initial rejection, the Indian government was willing to reconsider. The purpose of the meeting earlier this month was to further explore lower tax levies on electric vehicles.

During the meeting, Tesla revealed that it had already sourced components worth $100 million USD locally so far, and that it would ramp up sourcing if any tax concessions are awarded. In addition, Tesla has pledged investments in EV sales, service, and charging infrastructure.

The EV maker also told the Indian officials that it would consider making larger investments in manufacturing if it is granted tax breaks that would allow it to comfortably enter the Indian market with imported vehicles,

The Indian government will wait to see Tesla’s plans for the region before it makes any decisions, and also asked the electric automaker for its take on importing fully-built vehicles instead of knocked-down or partially built units, which carry lower import duties.