Under the Free Trade Agreement, India is considering reducing import tax on some electric vehicles from Britain by the end of this year. The government is considering a 30% concessional tariff on 2,500 EVs imported from Britain costing more than $80,000 annually, two people familiar with the matter told Bloomberg.
The Indian government currently imposes 70% to 100% tax on cars imported as fully built units, depending on their value.
There was hope till October, difficult even till December!
Import concessions on electric vehicles are one of Britain’s most awaited issues in the free trade agreement. Bloomberg News had earlier reported that Prime Minister Narendra Modi and his British counterpart Rishi Sunak had hoped to finalize the free trade deal by the end of last month, but now it is expected to take place by December. An announcement is not likely.
The Union Commerce Ministry did not immediately respond to a request for questions in this regard, while a spokesperson for the British Trade Department declined to comment as talks are still ongoing.
Demand for EVs is increasing rapidly in the country
India has become the most populous country in the world. Here the demand for electric vehicles is increasing among middle class and rich buyers. The high price of cars, low options and lack of charging stations have hindered the adoption of EVs in the country.
By flexing the EV segment, clean transportation in the country can be accelerated and air pollution can also be controlled. According to BloombergNEF, the research wing of Bloomberg,
- Last year, sales of electric vehicles in the country stood at 49,800, which is only 1.3% of the total 38 lakh passenger vehicles sold.
- The country’s best-selling electric car in the cost-conscious Indian market is Tata Motors’ Nexon (EV), which is priced at less than Rs 15 lakh.
- German luxury automaker BMQ, Mercedes-Benz Group and Volkswagen’s Audi sell electric cars in India priced above $80,000 i.e. Rs 66 lakh.
Government promoting EV sector
The Modi government at the Center is working cautiously on the import of EVs as it wants to create a domestic manufacturing industry for electric vehicles and EVs parts. The government has announced a $3.1 billion production linked incentive program for domestic EV production in 2021.
Both countries benefit from free trade deal
According to experts, the final decision on India’s position regarding import duty on EV has not been taken yet. Bloomberg News had earlier reported that India and Britain have already softened their positions on several issues, including reducing tariffs on British cars and Scotch whiskey.
Both countries expect the free trade agreement to double bilateral trade by 2030 through lower tariffs and increased market access. If this happens, it will also be a political victory for both the leaders (PM Modi and Rishi Sunak). The India-UK agreement will be seen as key to Brexit and a boost to India’s manufacturing ambitions.
The central government imposes various import duties on cars. Tax on vehicles purchased unassembled from abroad ranges from 15% to 35%
