Indian Government Lays Out Precondition For Tesla's Import Duty Cut Request

Tesla, Inc. TSLA has long been waiting to set foot on the Indian shores and it appears that the wait may not end anytime soon.

The company has been at loggerheads with the Indian government over the exorbitant duty that is applicable to imported cars in the country.

What Happened: The Indian government has mandated that Tesla should procure $500 million in auto components from India for it to reconsider Tesla's request for an import duty cut, Bloomberg reported, citing a person familiar with the matter.

India has reportedly given the leeway of starting with a smaller amount but required a commitment to increase the purchases in increments of 10%-15% each year before hitting the full quota. The target has yet to be communicated to Tesla, the report said.

Bloomberg reported in August 2021 that Tesla has had discussions with Indian ministries of Heavy Industries and Finance regarding various options for an import duty cut.

Related Link: Tesla Facing Increasing Competition From These 2 Carmakers: Report

India levies import duties ranging from 60%-100% and Tesla has been lobbying for a reduction to 40%. The company has also requested the scrapping of the 10% social welfare surcharge.

CEO Elon Musk has more than once communicated his stance that Tesla would like to test the Indian waters with its imported vehicles before making a call on setting up manufacturing base in India.

At a meeting held with the officials from the two ministries in mid-2021, Tesla reportedly stated that it has sourced components valued at $100 million so far from India. The EV maker also expressed willingness to increase spending upon the receipt of any tax concessions, the report said.

Why It's Important: India is a market that presents huge potential as well as challenges for EV manufacturers aspiring to gain a toehold. India is still in the nascent stage of EV adoption. The Indian government has laid out a target of EVs accounting for 30% of new vehicles sold in the country by 2030.

On the flip side, international players have to contend with policy constraints and procedural delays, while infrastructural bottlenecks may also impede a pickup in EV adoption in a big way.

Tesla shares were down 1.15% to $911.80 midday Wednesday. 

Related Link: Why Tesla Is No Longer Working On A Lower-Priced EV

Photo courtesy of Tesla.