In a potentially significant relief for Tesla and other multinational car companies seeking to import electric vehicles to India under a proposed specially-crafted and subsidised 15% duty regime, the government is contemplating excluding cost-heavy components such as batteries, semiconductors, and magnetic parts from the mandated localisation norms for global companies.

This relaxation, actively under consideration as per sources speaking to TOI, would offer a substantial reprieve for global companies required to meet domestic value addition conditions to qualify for the lower duty regime.

"The government is contemplating the exclusion of batteries, semiconductors, and magnetic parts from localisation conditions for electric vehicle imports. This could be a major advantage for companies like Tesla, which may take time to establish a reliable supply chain in India, even if it decides to set up a factory here in the coming years," sources informed a media company.

A person familiar with the matter stated, "The cumulative value of these three high-value items accounts for nearly 50% of the cost of a car, and any relaxation in this regard would be a significant relief."

However, this new consideration is met with opposition from local players such as Mahindra & Mahindra and Tata Motors, as well as foreign companies with decades-long operations in India, including Maruti Suzuki, Toyota, Hyundai, and Kia. These companies, already expressing concerns about the proposed reduction in import duty for electric vehicles, are now voicing their objections to further relaxations in domestic value addition norms. They feel that despite being the first to invest in electric vehicles at the government's urging, they would face a considerable disadvantage.

Sources indicated that the local automobile grouping is actively conveying their concerns to the government, while the Society of Indian Automobile Manufacturers (SIAM) is preparing a representation on the matter. The source added, "It is evident that local manufacturers, both domestic and multinational, are now united against newcomers like Tesla, apprehensive that an 'easy, well-facilitated entry' might jeopardize the prospects of their electric vehicles."

In contrast, a significant group of German companies, including Mercedes-Benz, Volkswagen Group, and BMW, is adopting a more observant stance. "The Germans are not opposed to lower import duties and easier sourcing norms. However, they are seeking lower investment commitments compared to newcomers, especially since they have already made certain investments in India, though not extremely substantial ones," the source noted.

Source: ET Auto