Luxury electric cars in India may soon become more expensive for consumers if an Indian tax panel’s recommendation for additional levies on luxury EVs goes through. According to a government document, the tax panel is proposing higher consumer levies for electric cars that cost more than $46,000, a move designed to boost consumption of locally produced goods at the expense of foreign companies like Tesla, BYD, BMW, and Mercedes-Benz.
Although India’s electric vehicle market is in its nascent stage, the country is a high-potential market for automakers who want to dominate the global auto landscape in the next couple of decades.
For Tesla, India represents an opportunity for incredibly high-volume sales as its population equals China’s but it is still in the very early stages of EV adoption, while BYD could diversify its portfolio by establishing roots in the Indian market.
Mercedes-Benz and BMW also rely on India as a key luxury stronghold, and while they currently have low sales volumes in the country, India’s luxury vehicle segment is steadily growing. Their goal is to maintain brand presence in the country and cater to their already existing clientele as they transition to electric cars, but these aspirations could be derailed by the Modi administration’s desire to boost consumption of domestically produced products.
Prime Minister Narendra Modi and his administration are currently working to reform the country’s tax system via the recommendation of major cuts in India’s goods and services taxes to make all kinds of products cheaper, as long as they are produced in the country. In addition to supporting the sweeping tax cuts suggested by Prime Minister Modi, the tax panel responsible for making tax rate recommendations to the GST Council recommended increasing the GST tax rate from 5% to 18% for electric cars that cost $23,000 to $46,000.
The panel also proposed increasing the tax on imported vehicles that cost more than $46,000 to 28%, but Modi’s administration eliminated the 28% tax rate and left the option of increasing EV taxes to 18% or charging them 40% alongside specific luxury goods. India’s GST Council, composed of the federal finance minister and representatives from all Indian states, convened on September 3-4 to evaluate these proposals and holds final decision-making power.
International automakers selling premium EVs in India face the greatest impact from these potential changes, with Tesla’s newly introduced Model Y priced from $65,000 and luxury models from Mercedes-Benz, BMW, and BYD all subject to higher taxation brackets. These proposals signal a deliberate protectionist approach designed to support domestic manufacturers like Tata Motors and Mahindra, and make imported luxury electric vehicles less competitive in India’s developing EV marketplace.
For companies like PowerBank Corporation (NASDAQ: SUUN) (Cboe CA: SUNN) (FRA: 103) that are looking to expand internationally, the growing trend of different countries passing protectionist tax policies could present a major headwind to their plans.
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