Ahead Of India Entry, Tesla Seeks Cut To EV Import Duties: Report

Tesla, Inc. TSLA will soon officially enter India, a market that offers huge potential.

Reports have suggested that at least three state governments in India have extended offers to the EV giant to set up manufacturing facilities.

What Happened: Tesla has written to the Indian government, requesting a big cut in taxes levied on imported EVs, Reuters reported, citing sources with knowledge of the matter.

The U.S. giant is aiming to get the import duty on fully assembled EVs slashed to 40%, the report said. The rates are 60% on cars priced below $40,000 and 100% for cars cabove $40,000.

Tesla, according to the report, has reasoned that a potential reduction in duties will kickstart demand and will more than offset lost revenues for the government. A 40% import duty, while making EVs affordable to local people, is still high enough to prompt companies to set up domestic manufacturing facilities.

Only Tesla's Model 3 vehicle is priced below $40,000.

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Why It's Important: EV penetration in India is at a very low level for reasons such as affordability and the lack of good charging infrastructure.

If Tesla succeeds in getting the Indian government to accede to its request, it can price its EVs competitively.

The EV maker, however, is not hinging its India entry on the import tax reduction. It has already set up an office in Bangalore, an IT hub in the southern state of Karnataka, and is planning to set up a showroom in Mumbai, India's financial capital.

Tesla has also assembled a management team to oversee its Indian operation.

Tesla shares were down 1.38% at $640.27 at last check. 

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