International Tax Panorama

Will Tesla finally be setting up its manufacturing plant in India? 

In a change of approach, Elon Musk’s Tesla is now considering manufacturing in India, this time even suggesting establishing a factory in the country to make electric cars for export as well as domestic sales.

It is no longer pressing with its earlier demand for first, lowering import duty on completely built units, which is at 100% for cars costing $40,000 and above.

However Tesla may still ask for some duty concessions but that would be for testing the market for some of its models, which may not have high domestic demand.

Why sudden Tesla’s interest in India? 

It is believed it came after seeing the success of Apple’s domestic manufacturing in the country. 

Opening exclusive showrooms under single brand retail, which requires 30% local sourcing, is also on the agenda.

New PLI Scheme by the Government 

The Union Cabinet on Wednesday approved the PLI scheme for auto, auto-components to boost the production of Electric Vehicles (EVs) and Hydrogen Fuel Vehicles.

At present, India is exporting worth $12 billion vehicles and worth $15 billion components. However, India is also importing components worth $17 billion. To reduce the import of components, the scheme will help those automotive companies

The current budget for advanced chemical cell batteries is Rs 18,100 crore, whereas Rs 25,938 crore is allocated for autos and their parts. In accordance with sources, the budget may be raised, incentives may also be altered, and participating enterprises will have the choice to switch to the new PLI plan for the two.

Import Duty Concessions

Government officials told Tesla that its demand for import concessions can be met albeit differently. Instead of importing CBUs at concessional duty, the government was ready to offer import duty concessions to the company on the components which are required for domestic manufacturing. Such a scheme currently works for the smartphone production-linked incentive scheme under the phased manufacturing programme (PMP).