India said on Friday it will lower import taxes on certain electric vehicles for companies committing to at least $500 million in investment and a manufacturing plant within three years, potentially bolstering Tesla’s plans to enter the market.
Companies that meet these requirements will be allowed to import a limited number of EVs at a lower tax of 15% on cars costing $35,000 and above.
India currently levies a tax of 70% or 100% on imported cars and EVs depending on their value.
“The policy is designed to attract investments in the e-vehicle space by reputed global EV manufacturers,” the commerce ministry said in a statement.
India has been working on a new EV policy for several months following a proposal by Tesla to set up an Indian factory and build a low-cost car at $24,000 in exchange for lower import taxes, Reuters has reported.
However, domestic automakers including Tata Motors and Mahindra & Mahindra have lobbied against lowering of taxes on EVs to protect the domestic industry and its investors.
The objective of the new policy is to “strengthen the EV ecosystem by promoting healthy competition among EV players leading to high volume of production, economies of scale, lower cost of production,” the commerce ministry said.
EV imports at a lower rate will be allowed for a maximum of five years and the total number will be capped at 8,000 a year.
The duty foregone by the government on the total number of EVs allowed for import would be limited to the investment made by the company or close to $800 million, whichever is lower.