At present, the country’s import duty on all cars priced below Rs 30 lakh is 60% and 100% beyond that price.

A disagreement between two automobile tycoons has triggered a long-standing debate over India’s taxation of electric vehicles, and all eyes are now on the Narendra Modi government’s next moves.

Last month, in a tweet, Tesla CEO Elon Musk said he wants to launch his cars in India but is holding back because of the import duties, which are “highest in the world by far for any large country”. Musk has been reiterating this challenge for at least two years now, but the government has not moved to address his concern despite Prime Minister Narendra Modi’s obsession with portraying India as a business-friendly destination for international ventures.

Even as the government is tight-lipped, Musk’s comment attracted a strong disagreement from Bhavish Aggarwal, co-founder and CEO of Indian mobility unicorn Ola, which is currently in the process of setting up an electric scooter factory in India.

Though many local voices have supported Aggarwal’s argument, more international automobile companies have joined Musk’s chorus.

On July 28, South Korean automotive manufacturer Hyundai joined Tesla’s appeal for lower import duty on EVs. On August 11, Volkswagen also spoke in support of Musk’s demand. “The market for EVs has to be big enough for investments to come in and for that, we shouldn’t be placing barriers,” Gurpratap Boparai, managing director of Skoda Auto Volkswagen India, told Reuters.

Unlike Aggarwal, Indian automobile industry analysts believe reducing import duty would be the right step by the Modi government even though the centre has in the past said it has no plans to do so.

“It will be paramount for India to reduce its existing import duties on EVs if the government is in favour of increasing EV penetration in the country,” said Vahishta Unwalla, lead analyst at credit rating firm Care Ratings.

At present, the import duty on all cars priced below $40,000 (Rs 30 lakh) is 60% and it is 100% for cars priced above $40,000.

High import duties

The high import duties currently make EVs from international brands almost unaffordable for the majority of Indians, said Jeetender Sharma, managing director and founder of Okinawa Autotech, a Rajasthan-based EV scooter manufacturing firmThis is bad news given that there are already barriers to EV adoption in India. “If somehow one can pay the heavy taxes, the charging infrastructure presents a lot of roadblocks,” Sharma said.

The government has not budged on the import duty front despite several requests over the year because it believes the high tax will encourage foreign carmakers to set up factories in India. However, analysts are of the view that the ground reality makes this an overly ambitious thought.

Source : Scroll