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The Indian government is considering slashing the import duty on electric cars to as low as 40 percent, reports Reuters citing two government officials. The development comes just days after Tesla appealed this to the Indian government.

The report adds that for electric vehicles (EVs) with a valuation of less than $40,000, the tax rate can be slashed to 40 percent compared to 60 percent currently. For EVs valued at over $40,000, the rate could be slashed from 100 percent to 60 percent.

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India’s finance and commerce ministries, as well as Niti Aayog, are discussing the proposal and all stakeholders will be consulted.

According to industry estimates, India is currently the fifth largest car market with an annual sale of about 3 million vehicles. However, the majority of cars sold in the country are priced under $20,000.

Last month, Tesla had pitched the Indian government to reduce the import duty on electric vehicles by arguing that lowering duties would make EVs more affordable and boost sales.  However, the appeal from Tesla received mixed reactions from industry leaders in India and pushed the ‘Make In India’ initiative, India’s drive to boost local manufacturing.

But one of the officials said that the government is in favor of cutting import duties to see companies like Tesla providing benefits to the domestic economy by manufacturing locally later on, or give a firm timeline on when it would be able to.

A government official told Reuters: “Reducing import duties is not a problem as not many EVs are imported in the country. But we need some economic gain out of that. We also have to balance the concerns of the domestic players.”

Since the duty cut is being considered only for EVs and not other categories of imported cars, it should not be a concern for domestic automakers as they mainly manufacture affordable gasoline-powered cars.

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