Tesla Inc has written to Indian ministries requesting a significant decrease in import charges on electric cars (EVs), which the company claims will increase demand and produce income for the government, according to two persons familiar with the situation.
However, Prime Minister Narendra Modi’s administration, which has championed hefty import duties for numerous industries in order to stimulate local production, is expected to oppose it.
Other luxury automakers in India have petitioned the government in the past to decrease import levies, but their efforts have largely failed due to opposition from domestic rivals.
According to the sources, Tesla, which plans to start selling cars in India this year, suggested in a letter to ministries and the country’s premier think tank, Niti Aayog, that lowering federal taxes on fully completed electric cars to 40% would be more suitable.
This contrasts to existing rates of 60% for cars priced under $40,000 and 100% for those priced over $40,000.
“The argument is that at 40% import duty, electric cars can become more affordable but the threshold is still high enough to compel companies to manufacture locally if demand picks up,” one of the sources said. The sources declined to be identified as the letter has not been made public.
According to Tesla’s U.S. website, only one model – the Model 3 Standard Range Plus – is priced below $40,000.
Tesla and Niti Aayog did not respond to an email seeking comment. Ministries that Tesla wrote to included the transport and heavy industries ministries, which did not immediately respond to a request for comment.
The Indian market for premium EVs, indeed for electric cars in general, is still very much in its infancy with vehicles far too costly for the average consumer and very little charging infrastructure in place.
Just 5,000 of the 2.4 million cars sold in India last year were electric and most were priced below $28,000.
Daimler’s Mercedes Benz began selling its EQC luxury EV in India last year for $136,000, and Audi launched three electric SUVs this week with sticker tags that begin at around $133,000.
While lower duties would give Tesla a better chance to test the market, both sources claimed that the company’s plan to start selling in India is unaffected by government policy.
Tesla established a local firm in India in January and has been hiring locally while looking for showroom space.
In March, India’s transport minister, Nitin Gadkari, told Reuters that the country would be willing to provide incentives to ensure Tesla’s cost of production in India is lower than in China, but only if the company manufactures locally.