Mumbai, India: The Maharashtra government‘s move to levy a 6% road tax on electric vehicles (EVs) that cost more than ₹30 lakh will make luxury EVs pricier. But the step is not expected to affect Tesla‘s foray into Mumbai, according to industry players.
The new tax will come into effect from April 1, 2025, as the subsidies for electric vehicles expire. Experts opine that this may impact EV adoption, but the expected reduction in battery prices, spurred by duty exemptions declared in the Union Budget, can counter some of the price increase.
Price Hike & Industry Reactions
“The electric vehicle prices will increase with the 6% tax implementation. The time for subsidy of electric vehicles is coming to an end. It was the best time to extend the subsidy since automobile players are introducing new launches,” said Manish Raj Singhania, Chairman, Research & Academy, Federation of Automobile Dealers Associations (FADA), in a statement to BusinessLine.
Presently, EV penetration in India‘s passenger car market is 2.5%. The new tax might be a hurdle to further expansion, although battery prices are anticipated to fall.
“Even though the proposed imposition of a 6% road tax on EVs with prices exceeding ₹30 lakh would raise the on-road cost, it would be partly compensated by a sustained fall in battery prices,” Rohan Kanwar Gupta, Vice President & Sector Head, Corporate Ratings, ICRA Limited, said.
Tesla‘s India Plans Unaffected
Tesla‘s future operations in Maharashtra are not affected by the tax.
“It may not be a significant blow for Tesla. But they will certainly demand a level playing field in India as they wish to operate in several states. A buyer of a vehicle above ₹30 lakh is an aspirational customer, and the tax will not deter them much,” said Hemal N Thakkar, Senior Practice Leader & Director, Crisil Intelligence.
EV Adoption Slows Amid New Tax Policies
The Indian government has also envisioned 30% EV penetration by 2030. But raising road taxes and state-level cesses could reduce the rate of adoption.
“Extra 6% tax on premium EVs, over and above the current 5% GST, might not deter EV enthusiasts but would stall wider consumer uptake. Even in the premium space, price sensitivity continues to be a key driver of purchase decisions,” said Nikhil Dhaka, Vice President, Primus Partners.
Revenue Boost for Maharashtra
Along with EVs, the Maharashtra government has also raised the tax on CNG vehicles by 1% to increase revenue for the state.
“The decision could fetch around ₹320 crore in the next fiscal. Automakers may rethink pricing, local assembly, or incentives to counter the tax effect,” said Pratik Kamdar, CEO & Co-Founder, Neuron Energy.
While Maharashtra takes measures to boost revenue, the question arises—will these levies dampen India‘s EV revolution, or will declining battery prices keep the momentum going?
One Comment