Tesla's long-running talks to enter the Indian market appear to have reached a new breakthrough. On Monday, November 13, the media quoted Indian government officials as saying that India was considering Tesla’s request to reduce tariffs on imported electric vehicles in exchange for Tesla building a factory in India. Currently, India imposes a high tariff of 70% on imported cars below US$40,000, and taxes as high as 100% on cars above US$40,000.
In past negotiations, Tesla had requested tariff concessions as a prerequisite for building a factory in India, but the Modi government has refused to compromise on tariffs, which ultimately led Tesla to give up entering the Indian market in 2022. Negotiations were restarted a year later.
According to two officials familiar with the matter, Tesla still made a request for import tariff reductions this time. An official said,Tesla requires the Indian government to at least provide certain tariff preferences in the initial stage of entering the Indian market. This preferential treatment may be in the form of a sunset clause, that is, it will be terminated after a certain period of time..
The media said that the Indian government is currently considering lowering the import tariff on electric vehicles to 15%, but the government has not yet reached an agreement on this policy.
One of the officials said of the proposed tax cuts:
"We want to have a package that is good for India and not exclusive to one company. We want other companies to be free to take advantage of this window, but certain requirements have to be met."
The specific negotiation process is still unknown, but Tesla executives have had very frequent interactions with the Indian government in the past year. This week, Indian Commerce Minister Piyush Goyal will go to San Francisco to attend the APEC summit hosted by the United States. According to an Indian official, Goyal is likely to meet Musk during the meeting.