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NEW DELHI, 9 November 2023: India is actively exploring the possibility of lowering import taxes on select electric vehicles (EVs) from the United Kingdom. This move is aimed at facilitating a free-trade agreement between the two nations, scheduled to be finalized by the end of the year. In this article, we’ll delve into the details of this proposal, its potential impact on the EV market in India, and the status of the trade negotiations.
India’s Proposal
India is considering a reduced tariff of 30% on 2,500 electric vehicles imported annually from the UK, provided they are priced above USD 80,000. This proposal, intended to foster the free-trade agreement, is part of New Delhi’s efforts to promote cleaner transportation solutions in the country.
The Current Tax Landscape
As of now, India imposes import taxes ranging from 70% to 100% on cars imported as completely built units, depending on their value. The high import taxes have been a significant barrier to the growth of the EV market in India.
Stalling Free Trade Talks
The demand for import concessions on electric vehicles is one of the key issues that remain unresolved in the free trade negotiations between the UK and India. While both Prime Minister Rishi Sunak and Indian Prime Minister Narendra Modi had initially aimed to conclude the agreement last month, it now seems likely that the deal won’t be announced until December.
India’s EV Market Potential
India, as the world’s most populous country, offers tremendous potential for the electric vehicle market. The rising demand for EVs among middle-class and affluent buyers is undeniable. However, the high cost of electric cars, limited options, and inadequate charging infrastructure have been impeding the sector’s growth.
Electric Vehicle Sales in India
In 2022, electric vehicle sales in India amounted to 49,800 units, making up just 1.3% of the 3.8 million passenger vehicles sold, as reported by BloombergNEF.
Pricing Disparities
In a cost-conscious market like India, the best-selling electric car, Tata Motors Ltd.’s Nexon.ev, is priced at less than 1.5 million rupees (USD 18,000). In contrast, German luxury automakers such as BMW, Mercedes-Benz, and Audi offer electric cars priced above USD 80,000 in India, creating a significant pricing gap.
Government’s Strategy
The Indian government is proceeding cautiously regarding EV imports as it strives to establish a domestic manufacturing industry for electric vehicles and their components. In 2021, the government introduced a USD 3.1 billion production-linked incentive program to boost local EV production.
Undecided Import Duties
While discussions are ongoing, a final decision regarding India’s stance on import duties for electric vehicles has yet to be reached.
Progress in Trade Negotiations
India and the UK have already demonstrated flexibility by softening their positions on various issues, including reducing tariffs on British cars and scotch whisky. Both countries anticipate that the free trade agreement will double bilateral trade by 2030, resulting from lower tariffs and increased market access.
The Bigger Picture
The proposed free trade deal holds significance not only for trade but also for political gains. It is considered a key achievement of Brexit and an opportunity to support India’s manufacturing ambitions.
Import Tax Ranges
India imposes a range of import duties on cars, with taxes varying from 15% to 35% for vehicles purchased unassembled from overseas.
Conclusion
India’s proposal to lower import taxes on UK electric vehicles reflects its commitment to fostering cleaner transportation and achieving a free-trade agreement with the UK. While the negotiations continue, the EV market in India is poised for potential growth, offering a win-win situation for both countries. Stay tuned for further developments in this dynamic trade scenario.
Image credit: India-briefing
