Tesla’s pitch for lowering import duty on fully-built electric cars has stoked a raging debate among automakers, dividing the industry right down the middle.
Billionaire CEO Elon Musk’s tweet about high import taxes has drawn a mixed responses from India’s automotive industry. While Hyundai agrees with Tesla for a cut in duties, Maruti Suzuki, Tata Motors and start-up Ola Electric are against any such cuts.
Responding to Musk’s tweet, Bhavish Aggarwal, CEO and founder of Ola, had said on the microblogging site: “Let's have confidence in our ability to build indigenously and also attract global OEMs to build in India, not just import. We won't be the first country to do so!"
Responding to Moneycontrol, Venu Srinivasan, Chairman of TVS Motor Company and TVS Group said, “We should encourage local manufacturing as envisioned by the government. I believe that importing CBUs (completely built units) would be detrimental for the future of Indian manufacturing.”
TVS Motor Company joined the electric vehicle bandwagon in January 2020 with the launch of its first all-electric product; the iQube scooter, which is almost fully made at a TVS factory.
Industrialist Rajiv Bajaj, however, said he was in favour of a middle path. He said that a cut in duty is favourable till the time the market matures and demand grows but thereafter would warrant a high duty structure for failing to manufacture the vehicles locally.
“I favour a middle path, because for me the guiding principle is demand first and then supply,” said Bajaj, the Managing Director of Bajaj Auto. “So up to a certain volume per year which may be different for different segments ranging from mass to premium, duties should be lower.”
“As an OEM (original equipment manufacturer) progressively achieves this volume it must localise aggressively failing which duties applicable would be much higher. So, in effect, a simple phased manufacturing plan would give the OEM time to test the market for demand without investing prematurely while simultaneously ensuring that when scale is achieved jobs are created in India not elsewhere,” Bajaj added.
Bajaj Auto has also entered the EV space with the Chetak all-electric scooter which was launched in January 2020. The Pune-based company is in the process of creating a new company exclusively for electric and hybrid vehicles.
Maruti Suzuki Chairman R C Bhargava also said, "The government policy is clearly in favour of local manufacturing and that applies to EVs also. There is no justification for changing this policy for any one particular product."
Tata Motors, India’s third largest carmaker, is the leader in the electric passenger car segment. The Mumbai-based company controls more than half of the electric car demand of India with the locally made Nexon EV. Tata Motors also has spoken against Tesla’s pitch for duty lowering stating that the government is expected to follow the policy of promoting local manufacturing of EVs.
Speaking to reporters PB Balaji, Chief Financial Officer, Tata Motors said, “I am sure the government will remain consistent to the philosophy of phased manufacturing plans for EV and the principles of FAME II. This is what all of us are working towards. The companies who are investing in the EV segment are looking forward to long-term visibility of the policy.” FAME, which stands for Faster Adoption and Manufacturing of Electric Vehicles, is a central government-funded demand-incentive scheme for the promotion of electric vehicles.
Tata Motors’ stance on the subject comes at a time when the Rs one-crore Jaguar I-Pace, a fully electric and fully imported model, is on sale in the country.
Import duty on EVs in India is 100 percent if CIF (cost, insurance and freight) value is more than $40,000 and 60 percent if CIF value is less than $40,000.
The government, on its part, seems reluctant to cut import taxes. Moneycontrol had reported that senior government officials have categorically ruled out any possibility of granting
Tesla any company-specific incentives or even an across-the-board cut in duties on fully built foreign vehicles.