In blow to Tesla, India says not planning to cut EV import tax

India’s government said it’s not currently considering reducing taxes on imported electric vehicles, a stance that could delay Tesla Inc.’s plan to enter the market.

“Presently, there is no proposal either to provide an exemption from local value addition cost or to provide a subsidy on the import duty on electric vehicles in India,” Som Parkash, junior minister of the Ministry of Commerce and Industry, told parliament late Wednesday. 

Parkash said existing policies under the government’s “Make-in-India” push are aimed at encouraging domestic and foreign investment in the EV industry. The government launched a $3.1 billion incentive program in 2021 to boost local EV production. In addition, it’s offering incentives to companies that want to build batteries in India under a $2 billion program. 

The government’s statement is an unexpected turn considering it was working on a policy that would have allowed international companies to import electric cars on concessional tax rates if they commit to eventually manufacturing in India, Bloomberg News reported last month.

The talks between Tesla and India could once again end in a deadlock. Both sides were earlier stuck in a year-long impasse as Prime Minister Narendra Modi’s administration pushed the US automaker to produce cars locally, while Tesla Chief Executive Officer Elon Musk sought lower taxes to first sell vehicles built elsewhere at competitive prices.

While they have resumed dialog since, and Musk even said Tesla would likely make a “significant investment” in the South Asian nation during Modi’s US visit in June, those plans could now get delayed.

India and Tesla were closing in on an agreement that involved selling the US automaker’s cars in the country from next year as well as setting up a factory in two years, Bloomberg reported last month.

The country’s Trade Minister Piyush Goyal, who visited Tesla’s plant in Fremont, California last month, has said that Tesla is planning to almost double purchases of auto parts from India to $1.9 billion this year.