India lowered import taxes on certain electric vehicles (EVs) for carmakers that commit to investing at least $500 million and start manufacturing in the country within three years. This policy is a major win for Tesla, as it aligns with what the company has been lobbying for in India despite pushback from domestic automakers.
Tesla CEO Elon Musk has been trying to enter the Indian market for years, but the Indian government wanted a commitment to local manufacturing. After Tesla officials visited India multiple times over the past year, the company reportedly offered to produce a $24,000 EV at a planned factory if import taxes were reduced.
The new policy, effective immediately, allows companies meeting the requirements to import up to 8,000 EVs costing $35,000 or more per year at a 15% tax rate, down from the current 70-100% rate based on value. This could benefit Tesla, whose least expensive Model 3 starts at $38,990 in the U.S.
India’s commerce minister welcomed global companies to invest, expressing confidence India will become an EV manufacturing hub creating jobs and improving trade. India’s EV market is small but growing rapidly, with EVs currently making up just 2% of total car sales but the government targeting 30% by 2030. India’s Tata Motors dominates current EV sales in the country.
The lower import tax rate will be allowed for up to 5 years, with the duty reduction capped at the company’s investment or $800 million. The policy opens up the world’s third-largest auto market amid slowing global EV sales growth and increasing competition for Tesla from competitors such China’s BYD and Vietnam’s VinFast, which plans a $2 billion India factory.
Last updated: December 26th, 2025
