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Tesla’s India Dreams Revived as Government Eases EV Import Norms

India's long-standing import tariffs on foreign-made vehicles have posed a barrier to Tesla's entry, but a recent policy pivot by the government signals a potential breakthrough for the EV giant

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For years, Tesla has sought to enter the Indian market, but the country’s punitive import tariffs on foreign-made vehicles posed a significant obstacle. However, a recent policy shift by the Indian government has cleared a major regulatory hurdle, potentially opening the door for the electric vehicle (EV) giant to establish a presence in one of the world’s largest automotive markets.

India has long imposed import duties of up to 100% on cars manufactured overseas, a measure designed to protect domestic automakers. This meant that a standard-range Tesla Model 3, which starts at $38,990 in the United States, would have cost over $77,000 in India under the previous regulations. Such exorbitant prices effectively priced Tesla out of the Indian market.

But in a move that could reshape the country’s automotive landscape, the Indian government has announced plans to lower import tariffs on certain electric vehicles to 15%, provided that automakers meet specific conditions. These conditions include investing at least $500 million in local manufacturing within three years and achieving 50% “domestic value addition” within five years, a requirement aimed at promoting localization and job creation within the country.

The policy shift represents a significant concession by the Indian government, which had previously demanded that Tesla commit to investing around $2 billion in local manufacturing before any import tax reductions were considered. The new threshold of $500 million is considerably more palatable for the California-based automaker, which has long sought to expand its global footprint.

The decision to lower import tariffs on EVs is part of a broader strategy by the Indian government to promote the adoption of electric vehicles and reduce the country’s reliance on fossil fuels. According to the commerce ministry, the new rules will “strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, lower cost of production, reduce imports of crude oil, lower trade deficit, reduce air pollution, particularly in cities, and will have a positive impact on health and environment.”

While the policy change has been welcomed by Tesla and other foreign automakers, it has faced opposition from domestic players like Tata Motors and Mahindra & Mahindra, who fear that increased competition from global giants could undermine their own businesses. Nevertheless, the government has pressed ahead, recognizing the importance of promoting clean energy and positioning India as a hub for EV manufacturing.

Tesla CEO Elon Musk has long expressed interest in the Indian market, stating last year that the company would enter the country “as soon as humanly possible.” During Indian Prime Minister Narendra Modi’s visit to New York City, Musk and Modi met on the sidelines, fueling speculation about a potential partnership between Tesla and India.

With the regulatory landscape shifting in Tesla’s favor, the stage appears set for the company to make a long-awaited foray into India’s vast and rapidly evolving automotive market. As the world continues its transition towards sustainable transportation, India’s embrace of electric vehicles could position it as a major player in the industry’s future.

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