Will Tesla's India Foray Be Delayed? Government Rules Out Import Duty Cut Sought By EV Maker

Electric vehicle giant Tesla, Inc.'s TSLA proposed foray into India could be pushed back further, going by indications from the Indian government.

What Happened: India is currently not contemplating any duty cut on imported vehicles, Krishan Pal Gurjar, India's Minister of State for the Ministry of Heavy Industries, told the Parliament Tuesday.

The Ministry of Heavy Industries is responsible for framing policies for the auto industry.

Gurjar said the Indian government will formulate policies to promote the use of EVs in India that would include lowering of domestic taxes and adding charging stations.

Tesla has been lobbying for a cut in import duties to make its EVs affordable in India, a country promising huge potential for the company, given the very low penetration.

Related Link: Tesla's FSD Could Alone Be Worth Much More Than The EV Giant's Current Market Cap In a Decade: Analyst

Why It's Important: The currently applicable import duty in India is 60% on cars priced below $40,000 and 100% for those above the price ceiling. Tesla has been representing for a reduction in the import duty on fully-assembled cars to 40%.

Tesla plans to initially sell its imported Model 3 vehicles, which have a starting price of around $39,900, in India. For a potential Tesla owner, the import duty added to the price of a Model 3 sedan may prove prohibitive.

India's stern stance on the import duty is premised on the government's policy of promoting domestic production. If Tesla were to escape the brunt of high taxes, the company may have to set up a manufacturing facility in India.

Tesla CEO Elon Musk, however, wants to test the Indian waters with imported vehicles before committing to set up a domestic manufacturing facility.

Tesla's shares, which have picked up momentum in recent sessions, were trading down 0.21% at $708.21 Tuesday at publication.

Related Link: Tesla Analyst Cuts Price Target By 17% On Potential Battery Delay

Photo: Courtesy of Tesla