Why India turned down Elon Musk’s tax break request
- Elon Musk’s Tesla sought breaks on import duties for the electric cars
- The Indian government has been pushing Tesla to manufacture locally
- A Tesla costs the equivalent of Rs 34 lakh in the US
India has effectively turned down Elon Musk’s request for tax breaks on Tesla cars. Musk, the 50-year-old billionaire owner of Tesla, had been seeking tax breaks from the Indian government for a while. But the government has maintained that the US-based electric car company must manufacture in India in order to be considered for tax benefits.
Vivek Johri, chairman of India’s Central Board of Indirect taxes and Customs, told Bloomberg Thursday, “We looked at whether the duties need to be re-jigged, but some domestic production is happening and some investments have come with the current tax structure.”
“So, it is clear that this [taxes] are not a hindrance,” Johri said.
The second-most populous country in the world, India has been battling a high unemployment rate for some time now. As such, while the government does seek to boost the automobile industry, local manufacturing remains its priority.
Earlier this year, Musk, a darling of Twitter users, wrote on the platform that Tesla was “still working through a lot of challenges with the Indian government.”
The billionaire entrepreneur, who also leads SpaceX, has repeatedly cited high import duties in India as the reason for not launching the high-tech eV in the market.
According to estimates reported by Quartz.com, a Tesla in the United States is priced around $44,690 which comes to nearly Rs 34 lakh in Indian currency. However, with the import duties included, a Tesla in India would cost somewhere around Rs 60 lakh.
Musk’s tweet about the challenges Tesla was facing in India led to at least four Indian states call on the billionaire to set up shop, including Telangana, West Bengal, Maharashtra and Punjab.
The Union government, however, maintains its demand for local manufacturing. Johri said the US-based car manufacturer should follow the lead of domestic auto makers in India to help build capacity of electric vehicles.
India recently adopted the Bharat Standard VI (BS-VI) emission norms to curb vehicular pollution. Electric vehicles too remain the government’s priority. However, a major bottleneck for India is the absence of adequate charging infrastructure. The Indian government expects local manufacturing to also enable the creation of charging infra.
On the other hand, Tesla wants to first enter the market as a seller and may subsequently think about turning manufacturer. Although, it is pertinent that India doesn’t really have critical raw materials such as lithium, cobalt and nickel, which are used to make electric cars in large quantities.