In a move that could significantly impact India’s electric vehicle (EV) market, the Government of India is reportedly considering slashing import duties on fully built EVs from 110% to 15%, according to sources cited by The Economic Times. This decision, if implemented, could provide a major boost to global EV manufacturers like Tesla, which has long been eyeing entry into the Indian market.
However, this policy change has massive implications for Indian automakers like Tata Motors, Mahindra, and Maruti Suzuki, who have invested heavily in local EV production.
New EV Import Policy: Key Provisions
Under the proposed framework, import duties on premium EVs priced above $35,000 (approximately ₹30 lakh) would be slashed to 15% if manufacturers meet specific investment and production targets. These include:
- A minimum investment of ₹4,150 crore ($500 million) in India, excluding previous investments and land costs.
- Achieving a turnover of ₹2,500 crore by the second year, ₹5,000 crore by the fourth year, and ₹7,500 crore by the fifth year.
- Setting up a manufacturing facility within three years and meeting domestic value addition targets—starting at 25% and increasing to 50% within five years.
If these conditions are met, automakers will be allowed to import up to 8,000 high-end EVs annually at the reduced tariff. An official notification is expected in the coming weeks, with approval letters potentially being issued by July-August 2025.
How Will This Affect Tesla?
Tesla CEO Elon Musk has long considered India a potential market, but he remains hesitant about establishing a local manufacturing facility. This policy presents both an opportunity and a challenge for Tesla—while the lower tariff makes entry into India easier, the company must commit to setting up a factory within three years to avail the benefits.
In a recent interview with Reuters, former US President Donald Trump expressed concerns about Tesla’s potential expansion into India, calling it “unfair” to American interests.
“Now, if he built the factory in India, that’s okay, but that’s unfair to us. It’s very unfair,” Trump stated.
This statement raises questions about whether Tesla will move forward with its India plans or continue its cautious approach.
Impact on Tata, Mahindra & Maruti
While Tesla stands to gain from this policy, Indian automakers like Tata, Mahindra, and Maruti Suzuki could face major challenges.
Tata Motors – India’s EV Leader Faces Global Competition
Tata Motors currently dominates the Indian EV market with models like the Nexon EV and Tiago EV, which are priced well below the $35,000 mark. However, if Tesla and other global automakers enter India at a reduced import duty, it could intensify competition in the premium EV segment.
An industry expert stated:
“Tata Motors has invested significantly in local EV production, and a policy favoring imports could disrupt the level playing field.”
Mahindra – Battling Global EV Giants
Mahindra, which is gearing up to launch Born Electric SUVs and recently partnered with Volkswagen for EV components, may find it harder to compete if luxury global brands enter the Indian market.
A company insider revealed:
“Lowering import duties for Tesla and other premium EVs might hurt domestic players, especially when we are just beginning to scale up local production.”
Maruti Suzuki – A Latecomer to the EV Game
Maruti Suzuki, which has been slow in the EV race compared to Tata and Mahindra, could find itself in a more difficult position. The company has plans to launch its first EV in 2025, but a surge of premium imported EVs at lower tariffs could shift consumer demand away from upcoming local models.
Will the Policy Hurt ‘Make in India’?
Critics argue that this move contradicts the ‘Make in India’ vision, as it could encourage automakers to import EVs instead of manufacturing them locally.
A senior auto industry executive commented:
“The reduced import duty should be paired with strong incentives for domestic manufacturers. Otherwise, it might slow down India’s own EV production ecosystem.”
Final Thoughts: What’s Next?
With the government yet to announce the final policy, Indian automakers are watching closely. If Tesla commits to setting up a factory in India, it could pave the way for other global brands to enter. However, if the policy favours import over local manufacturing, it could slow down India’s EV self-sufficiency goals and challenge domestic players.
For now, all eyes are on July-August 2025, when approval letters could be issued. The question remains: Will Tesla finally take the plunge, and how will Indian automakers respond to this potential shake-up?
