Mumbai: Hyundai Motor, Tata Motors, and M&M fell up to 6% on Feb 21. The decline occurred following a debate about the Indian government’s potential to relax vehicle import rules, thereby allowing foreign automakers to enter the Indian market. The speculation over Tesla’s much-touted foray into India has only increased doubts among domestic carmakers over the possible surge in competition.
M&M fell the most in nearly seven months at ₹2,653. Tata Motors shares dropped 2% to ₹676, while Hyundai Motor India shares fell 2.5% to ₹1,875. Tesla is increasing its Indian initiatives, which is contributing to this downturn.
If this report by Moneycontrol proves to be right, we may see Elon Musk’s Tesla Inc. entering the Indian market with direct imports instead of local manufacturing at the beginning. The Indian government is reportedly contemplating lowering import duties on EVs and further easing EV import norms to facilitate Tesla pondering over an entry.
Earlier, the government had reduced its basic customs duty (BCD) on fully built electric vehicles over $40,000 by 10% to 70%. However, the government has levied an additional 40% Agriculture Infrastructure and Development Cess (AIDC). This will remove the 10% Social Welfare Surcharge (SWS) which puts duties on cars at an effective 110% on import duties for EVs in this bracket. On the contrary, the import duty on EVs with a price tag of less than $40,000 remains 70%.
Post the news, the Nifty Auto Index fell 2.5 percent to close at 21,534 points. Companies such as Tata Motors, Mahindra & Mahindra, Hyundai Motor India, Maruti Suzuki, and Bajaj Auto fell heavily on the index, dragging it down. The Nifty Auto Index is down by a subdued 6% since the start of the year.
The policy change in India’s EV space has caused tremors throughout the domestic car market. However, the influx of international players such as Tesla could amplify domestic competition but also pose a major threat to local manufacturers. However, this policy shift is an important step to establish India as a major supplier in the global electric vehicle sector.