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Volkswagen has partnered with Tesla to support reduction of import duties in India, the main obstacle between automakers selling their vehicles in the market due to the high tariffs the country’s government has equipped to boost local manufacturing.
In recent months, Tesla has made further progress to enter India with its vehicles, hoping to increase sales in the world’s fifth-largest car market. In 2021, Tesla made more progress with entering India than ever before, receiving business licenses, registering as an entity with the ability to sell vehicles, and creating a team of corporate executives to oversee the whole operation. It looked like Tesla would finally enter the market, bringing clean and sustainable all-electric powertrains to the oil-expert Indian nation.
However, import taxes are currently a major drag in the process. Cars priced at $ 40,000 or less are subject to a 60% import tax, while anything over that number is subject to a 100% duty, thus doubling the price of the car. Tesla tried to lobby Indian government officials to reduce import duties. Yet many MPs have refused to work with the automaker, as local manufacturing is the priority. Some government officials fear this could slow down domestic auto makers and auto parts suppliers. The agreement should benefit local Indian entities.
This led to a bottleneck in Tesla’s potential entry as CEO Elon Musk said he was unwilling to establish a manufacturing facility in India without testing demand. Demand would be measured by imports, and if sales figures in India were high enough for a production facility to be warranted, Musk said Tesla would build an assembly facility in the country. However, Tesla was pushed back by politicians who said individual companies could not receive incentives, but Tesla pushed all electric vehicle makers to qualify for the cuts. Earlier this week, Indian officials announced that there had been talks to reduce tariffs to encourage foreign manufacturers to sell their products in the country.
Today, Volkswagen AG is getting involved and is also pushing for lower import duties in India. The company is offering reductions of up to 25% on import duties, saying the reduction would not pose a “great threat” to domestic companies, but would still make imported vehicles more expensive than local options.
“The electric vehicle market has to be big enough for investments to come in, and for that we should not put up barriers,” said Skoda Auto Volkswagen India General Manager Gurpratap Boparai. Reuters.
Volkswagen AG offers several electric vehicles in its various brands, including Audi, and of course, its own brand VW with the ID.3, ID.4 and other models that will soon go into production. However, it only aims for its Volkswagen and Skoda brands to enter the market. This will not happen unless there is a move on import duties.
Attempts to cut tariffs have prompted other automakers like Mercedes-Benz and Hyundai to voice their support for the proposed cuts. However, local companies, like Tata Motors, are not encouraged by the proposals. Again, the argument is that local manufacturing should be favored. Boparai disagrees.
“I’m not saying at all that local manufacturing shouldn’t be encouraged… but the 60% and 100% tariffs are prohibitive at this point,” he added.
What do you think? Let us know in the comments below, or be sure to email me at [email protected] or on Twitter @KlenderJoey.
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