Hyundai Pitches for Import Duty Cut on Electric Vehicles

Any duty rate cut by the government on imported electric vehicles would be very beneficial as it would help automakers generate much-needed volumes and reach some viable scale, Hyundai said on Tuesday.

The automaker, which inaugurated its new corporate headquarters here, supported the demand of Tesla which has sought lowering of duties on imported EVs. Hyundai noted that support from the government in terms of taxation and creation of country-wide charging infrastructure were the two most critical factors to grow EV segment in India.

“We have heard that Tesla is seeking some duty cut on imports of CBUs. So that would be very helpful for the OEMs to reach some economy of scale in this very price competitive segment,” Hyundai India MD and CEO SS Kim told reporters here.

Till the time companies are able to localise EV components and other infrastructure, EV imports could help generate some market in the country, he added.

“It will take OEMs time to localise EVs by 100 percent. We are developing made in India affordable mass market EV but at the same time if the government allows some reduction in the duty on imported CBUs that would be very helpful for all of us to create some market demand and reach some scale,” Kim noted.

At present, cars imported as completely built units (CBUs) attract customs duty ranging from 60 percent to 100 percent, depending on engine size and cost, insurance and freight (CIF) value less or above $40,000 (roughly Rs. 30 lakhs).

Last week Tesla Chief Executive Officer Elon Musk had said that the company may set up a manufacturing unit in India if it first succeeds with imported vehicles in the country.

He, however, said at present import duties in India are “the highest in the world” and is hoping for “at least a temporary tariff relief for electric vehicles.”

Interacting on Twitter with followers who asked him to launch Tesla cars in India Musk said, “We want to do so, but import duties are the highest in the world by far of any large country!”

Musk further said, “Clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India.”

He, however, said, “We are hopeful that there will be at least a temporary tariff relief for electric vehicles. That would be much appreciated.”

Asked by a follower if Tesla could start with local assembly in India, Musk said, “If Tesla is able to succeed with imported vehicles, then a factory in India is quite likely.”

Kim noted that the domestic market is ready for electric two- and three-wheelers but it may take some time before four-wheelers gain a foothold.

“We need some more support from the government in terms of tax and some incentives. From our experience in various global markets, such as South Korea, China and some European countries, we know that in India there still remains the anxiety related to charging infrastructure and the pricing of EVs,” he stated.

Range anxiety is a very serious matter from a customer viewpoint, he said.

Kim noted that in order to make EVs affordable, the government can offer subsidies under FAME scheme to private customers as well.

He added that with government support the industry can reach some level of scale in two years.

“If we have some meaningful support, even for the private customer, that would be very helpful. Also, the tax reduction will be great for the customer. If the demand is there and the market is starting to grow I think that in two years we can reach the meaningful point in terms of scale and from that point we can manage,” Kim noted.

“Until we reach that point we need support from the government and that would be very critical for the segment,” he added.

He said that the company can look at two options for rolling out EVs in India.

“Either we can find some local partner here or we can bring some global partner here. When we entered India 25 years ago we brought 50 tier 1 vendors with us. Now they operating on a global basis from here. We want to set up this kind of ecosystem here. So we are studying various options,” Kim said.

On developing charging infrastructure in the country, he noted that the company could take some measures but it would be very limited in scale.

"Not only reduction in duties but more investment on charging infrastructure from the government would be critical for the future of EV market in the country. The customer is most concerned about the range and charging options. In this regard we need some very strong support from the government," he added.

On introducing EV model Ioniq in the country, Kim said, "Ioniq is a great looking and performance vehicle. We are studying the feasibility of the model. If the market and the customer want that vehicle we can try to bring it."

The company currently sells only Kona Electric SUV in the country. It is said to be working to locally develop its second EV model which would be on the affordable side.

On new corporate headquarters, Kim said the company has invested over Rs 1,000 crore on the project till date.

“This new building stands as a symbol of the company's journey of togetherness with the people of India,” he noted.

When asked if the company would also consider Haryana to set up its next factory in the country, Kim said: “In the coming two years we have no issues in meeting the demand (from Chennai plant) so after that if we need some more capacity we will work out some strategy at that time. Any place could be good candidate but it would be based on things like procurement, supplier chain and availability of labour force etc.”

The new corporate office, with built-up area of over 28,000 square meters, was inaugurated by Haryana Chief Minister Manohar Lal Khattar.

Speaking at the occasion, the chief minister said the state government is providing all kinds of support to corporates willing to invest in the state.

Since its entry into Indian market in 1998, Hyundai has invested over $4 billion (roughly Rs. 29,777 crores) in the country.

From selling one model in 1998, it now sells 12 models in the country with a market share of 17 per cent in the passenger vehicle segment.