India has announced plans to lower import taxes on certain electric vehicles (EVs) for companies that commit to investing at least US$500 million and establishing a manufacturing plant within three years. This move could potentially bolster Tesla's plans to enter the Indian market. Companies meeting these requirements will be allowed to import a limited number of EVs at a reduced tax rate of 15% for cars costing US$35,000 and above. Currently, India imposes a tax of 70% or 100% on imported cars and EVs, depending on their value.

The objective of this new policy is to strengthen the EV ecosystem by promoting healthy competition among EV manufacturers, leading to high production volumes, economies of scale, and lower production costs. The reduced tax rate will apply to EV imports for a maximum of five years, with a total cap of 8,000 vehicles per year. The government will forego duty on the total number of EVs allowed for import, limited to the investment made by the company or close to US$800 million, whichever is lower.

For Tesla, breaking into India's market, where aspirational middle-class consumers are increasingly adopting electric vehicles, would be a significant opportunity. CEO Elon Musk has expressed interest in the country, and he intends to visit India in 2024. Tesla also sees potential in India for sustainable power generation through solar and wind, as well as energy storage using stationary batteries. However, domestic carmakers, including Tata Motors and Mahindra & Mahindra, have lobbied against lowering taxes on EVs to protect the domestic industry and its investors.