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Tesla in India if they Shell out $500 Million!

Your dream of owning a Tesla could be closer to reality! After repeated requests from Elon Musk and other international EV makers, the government has slashed import duties under some conditions. The Central government has developed a new policy for new entrants in the Indian EV market. What is it all about, and who will it benefit? You will find the answers to that ahead:

Import Duty down to 15%

According to the government's plan, EV makers entering India must pay a 15% import duty on imported vehicles instead of 70% earlier. This applies only to 8,000 EVs per year and must be priced above $35,000 (around Rs 29 Lakh). This incentive will be available after they commit to investing $500 million (Rs 4150 crore) in India over the next three years. A bank guarantee should ensure this investment.

This investment should be towards building manufacturing facilities in the country. These facilities are to be set up within three years. The government has also asked these players to achieve a Domestic value addition of about 25% by the end of the 3rd year. This should further increase to 50% in the 5th year. Domestic Value addition is the percentage of the parts used in a vehicle that are locally sourced. If the manufacturer fails to meet this demand, their bank guarantee will be invoked.

Why $35,000?

When the government initially discussed this policy in November, they had a price range of $25,000 to $35,000 in mind. This changed when Indian automakers Tata Motors and Mahindra & Mahindra came into the picture. They lobbied the government to set this price above $35,000. This would help keep the foreign players from entering the affordable range where they have significant investments. 

Who are the winners and losers?

Tesla stands to gain a lot from the decision. Their Model 3 and Model Y are priced above $35,000 in the international markets. They could be the first entrants from the American EV maker in India. Vinfast Electric will have to make fresh plans for strategy as most EVs are below the $35,000 mark in the global markets. 

Can Present Players participate?

Existing automakers like Hyundai, Kia, BYD or MG Motor India, or luxury makers like Mercedes Benz and BMW won't be able to participate in this scheme. The only way they can is to invest at least $500 million in the span of three years in aspects like assembly operations, battery manufacturing or establishing charging infrastructure.

What impacts could it bring?

New international players might be tempted into the Indian market with reduced import duties. With the entry of Tesla and Vinfast, the present players will see increased competition, which might benefit the customers. At the very least, we will have some Teslas running on Indian roads. How do you think the Tesla autopilot will fare on the crowded Indian roads with potholes as big as craters?

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