The Maharashtra government’s recent decision to introduce a 6% tax on electric vehicles priced over ₹30 lakhs is expected to lead to increased costs for these vehicles. However, this tax is not anticipated to affect Tesla’s entry into the Mumbai market.
The tax will be implemented starting April 1. Manish Raj Singhania, Chairman of the Federation of Automobile Dealers Associations (FADA), remarked, “With the introduction of the 6% tax, the prices of electric vehicles (EVs) will rise. The timing of this policy is unfortunate, as the period for EV subsidies is ending just as automobile manufacturers are rolling out new products.”
Currently, electric vehicles represent about 2.5% of the passenger car market in India. Experts suggest that while the cost of EVs may increase due to this tax, battery prices are expected to decrease thanks to the duty exemptions announced in the recent budget.
Rohan Kanwar Gupta, Vice President and Sector Head of Corporate Ratings at ICRA Limited, commented, “Although the 6% road tax on vehicles priced above ₹30 lakhs will raise the on-road cost of EVs, this increase may be somewhat mitigated by anticipated declines in battery prices.”
The tax is not expected to hinder Tesla’s operations in Maharashtra. Hemal N. Thakkar, Senior Practice Leader and Director at Crisil Intelligence, stated, “While this may not significantly impact Tesla, they will likely seek a level playing field in India, given their plans to operate in multiple states. Consumers interested in purchasing vehicles over ₹30 lakhs are typically aspirational buyers, and this tax is unlikely to significantly influence their purchase decisions.”
The Indian government aims for a 30% penetration of electric vehicles by 2030. However, the rise in road taxes and implementation of state taxes could hinder this goal. Nikhil Dhaka, Vice President of Primus Partners, pointed out, “The additional 6% tax on premium EVs, combined with the existing 5% GST, may not deter electric vehicle enthusiasts, but it could slow overall consumer adoption. Even among premium vehicle buyers, price sensitivity is a key factor that affects purchasing choices.”
Additionally, the Maharashtra government has announced a 1% increase in taxes for CNG vehicles. This move is intended to generate revenue for the financially struggling state, with an estimated gain of around ₹320 crores in the upcoming fiscal year. Pratik Kamdar, CEO and Co-Founder of Neuron Energy, suggested that automakers may need to reconsider their pricing strategies, local assembly processes, or offer incentives in order to offset the impact of these taxes.
