Volkswagen joins Tesla's lobby to call on India to lower import taxes on electric vehicles

Volkswagen (Volkswagen AG), the world's second-largest carmaker, joined Tesla's lobby on Tuesday, calling on the Indian government to lower import tariffs on electric vehicles to stimulate demand for clean cars.

Gurpratap Boparai, general manager of Skoda India, a Volkswagen subsidiary, said that even a reduction in import tariffs on electric vehicles from the current level of as high as 100 per cent to 25 per cent would not pose a "huge threat" to domestic companies but would help boost investment.

"the electric car market has to be big enough to attract investment, so we should not erect tariff barriers," Boparai said.

Volkswagen is considering launching Volkswagen and Skoda-branded electric cars in the Indian market, but needs to see lower import tariffs, stable tax policies and long-term incentives to take a chance, he said. The development of local charging infrastructure will also affect public decision-making.

Indian officials revealed earlier this week that the government is considering reducing the import tax rate on imported electric vehicles (including the cost, insurance and freight of electric vehicles) that cost less than $40,000 from 60% to 40%. Reduce the import tax rate on electric vehicles priced above $40,000 from 100% to 60%. At present, the proposal is still under discussion.

Musk (Elon Musk), chief executive of Tesla, said at the end of July that he hoped India would at least temporarily reduce tariffs on electric cars, which would expand the possibility of Tesla building a factory in India.

Mr Musk's call is divisive in the auto industry, with global carmakers such as Daimler (Daimler) 's Mercedes-Benz and Hyundai (Hyundai Motor) supporting tax cuts but domestic carmakers such as Tata (Tata Motors) opposing it, saying it will undermine India's efforts to increase local production.

"I'm not saying that local manufacturing should not be encouraged, but the high tax rates of 60 per cent and 100 per cent are prohibitive," Mr Boparai said, adding that more demand was needed to build electric cars locally.

Volkswagen's Electric ambition

Volkswagen aims to overtake Tesla to become the world's largest electric car maker by 2025. The company is investing billions of dollars in the development and production of electric cars, which are expected to account for half of its global car sales by 2030.

India is the world's fifth-largest car market, with annual sales of about 3 million vehicles. Although India is also on Volkswagen's electric car landscape, Boparai expects India's electrification process to lag behind Europe and China because of high car prices and a lack of local charging infrastructure.

In July, Volkswagen began selling three Audi electric SUV, models in India, priced at $133000, which is unaffordable for most Indian buyers. Ninety-five percent of the country's cars sell for less than $20,000. However, Porsche, a luxury car brand owned by Volkswagen, also plans to launch an electric car, the Taycan, in India next year.

Boparai expects demand for electric vehicles to start at the top end of the market, just as it did in markets such as those dominated by Tesla in the US. However, he added that India also needs cheap electric cars, which will start with car-hailing or corporate car-hailing.