While India currently imports just about 8,000 EVs per year, HSBC warns shift in EV regulations might cause long-term investment issues for ICE automakers, potentially affecting the whole domestic auto industry.
HSBC, a global brokerage, raised concern over the government’s reported plans to amend India’s EV policy, claiming that the proposed changes would put domestic automakers at a competitive disadvantage against imported electric vehicles. The development comes amid allegations that the government is considering decreasing import charges on international EVs as part of a larger campaign to attract Tesla to India following Prime Minister Narendra Modi’s meeting with Elon Musk in the United States.
43-50% GST on ICE
HSBC points out that the proposed 15% import duty on EVs is much lower than the 43-50 per cent GST applied on equivalent internal combustion engine (ICE) passenger vehicles made locally, which also face an additional 13% road tax.
While India currently imports only about 8,000 EVs per year, HSBC warns that such a EV regulations shift might cause long-term investment issues for ICE automakers, potentially affecting the whole domestic auto industry.
HSBC’s statement comes just a day after two other international brokerages, Nomura and CLSA, shared their perspectives. CLSA says that market euphoria about Tesla’s arrival in India may be excessive. While a sub-Rs 25 lakh on-road model might help the American behemoth capture considerable market share, the brokerage does not see its debut having a significant influence on established players such as Maruti Suzuki, Hyundai, or Tata Motors. Instead, Tesla’s arrival is expected to increase premiumisation in India’s auto sector.
Domestic production setup
Despite the significant speculation, CLSA emphasises that Tesla would need local manufacturing to scale effectively. Even with import levies around 20%, pricing vehicles under Rs 35-40 lakh would be difficult without a domestic production setup. As Tesla’s India strategy unfolds, observers keep an eye out for its next move in one of the world’s fastest-growing vehicle markets.
Nomura believes that India’s developing EV legislation will accelerate electric vehicle adoption, making investment simpler for Tesla and other global automakers. The regulatory reform is also likely to enhance India’s charging infrastructure, which will help important suppliers such as Sona Comstar, Sansera, and Motherson Sumi. However, the brokerage is sceptical that Tesla will produce a budget-friendly Rs 21 lakh model, as some reports have suggested.
Tata Motors shares fell 0.4 per cent to Rs 665 around 2:40 p.m., while Maruti Suzuki rose 1 per cent. M&M rose nearly 3%, while Hyundai Motor India rose 2% in trade. However, the Nifty Auto index rose 0.8 per cent. The index has fallen by more than 17 per cent in the last six months.
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