Tesla should make electric cars in India, urges Niti Aayog

A day after reports that US-based electric vehicle manufacturer Tesla has moved PM Narendra Modi's office to urge reduction in import taxes on EVs, Niti Aayog has urged the carmaker to start making in India, assuring tax benefits it seeks from the Centre.

The remarks were made by Rajiv Kumar, Vice Chairman of Niti Aayog, on Thursday while speaking at a conference. He urged Tesla to not follow the CBU route to export its electric cars to India, and instead should set up a facility and create job opportunities while helping strengthen India's EV infrastructure.

Kumar said, "Come and manufacture in India, you (Tesla) will get all the tax benefits you want. The argument that we will create a market by exporting into India finished products... is an old argument and we have moved on from that."

Ahead of its much-anticipated launch, Tesla has been lobbying in India to try and reduce import duties on electric cars, something which the carmaker and its CEO Elon Musk think as too high. According to recent reports, Tesla executives met PM's officials in September in a closed-door meeting to put forward the company's concerns regarding high taxes.

Tesla has sought standardisation of taxes on electric cars to 40 per cent irrespective of the customs value, and withdraw the social welfare surcharge of 10 per cent on electric cars. Tesla, in its pitch to the government, argued that lowering import duties on EVs to 40% would make them more affordable and boost sales.

According to a Reuters report, the government is discussing slashing the tax rate to 40% from 60% for imported electric vehicles worth less than $40,000, which include the car's cost, insurance and freight. For EVs priced at more than $40,000, the government may look at cutting the rate to 60% from 100%.

The concern over high taxes was first raised by Elon Musk earlier this year. Taking to social media platform Twitter, Musk had said that a local factory in India was "quite likely" if the company was successful with vehicle imports but taxes on them are high.

Musk's demand to slash import duties on EVs triggered a debate among carmakers operating in India. While Tesla's demands found support from Mercedes and Hyundai, OEMs like Tata Motors, which produces some of the most affordable electric cars in the country, and Ola Electric though otherwise.