Indian Automakers Face Pressure Amidst Potential New EV Policy and Tesla's Entry

Shares of major Indian automakers like

,! Mahindra & Mahindra ( ), and Hyundai Motor India experienced declines of up to 6% amid speculation surrounding a new Electric Vehicle (EV) policy and the impending arrival of Tesla in the Indian market. M&M's shares saw the most significant drop, marking their biggest single-day fall in nearly seven months, reaching Rs 2,653. Tata Motors shares also traded lower, down 2%, at Rs 676, while Hyundai Motor India slipped 2.5% to Rs 1,875. This downturn comes as Tesla Inc. intensifies its efforts to enter the Indian market. Reports suggest that Tesla is likely to pursue direct imports initially, rather than immediately committing to local manufacturing. To facilitate this entry, the Indian government is reportedly considering reducing import duties on EVs and relaxing EV import norms more broadly. Further duty relief may be offered to attract other leading global EV players, signaling a potential policy shift aimed at attracting foreign investment and bolstering India's position in the global EV supply chain. Despite the potential challenge from Tesla, Geojit Financial analysts suggest that Indian automakers, particularly M&M, may retain a competitive edge. They argue that Tesla might find it difficult to match M&M's pricing, extensive distribution network, and established service infrastructure. The current import duty structure for EVs in India is complex. While the Basic Customs Duty (BCD) on fully built EVs priced above $40,000 has been reduced to 70%, a 40% Agriculture Infrastructure and Development Cess (AIDC) has been added. Although the 10% Social Welfare Surcharge (SWS) has been exempted, the effective import duty for these higher-priced EVs remains at 110%. For EVs priced below $40,000, the import duty continues at 70%. The potential changes to this structure are a key factor influencing investor sentiment towards domestic automakers.