On February 21, shares in Indian automakers Tata Motors, Mahindra & Mahindra (M&M), and Hyundai Motor India dropped up to 6%. The dip falls amid rumours that the Indian government would relax EV import regulations, hence fuelling more international player rivalry. With Tesla quickening its India arrival, the automotive scene is about to change. For Indian manufacturers and investors, however, this implies otherwise.
The change in EV policy?
Relaxation of Duties in Importance
To draw in international players like Tesla, the government is apparently contemplating reducing import taxes on electric cars (EVs). The Basic Customs Duty (BCD) on fully manufactured EVs costing more than $40,000 has currently been dropped to 70%. But the 10% Social Welfare Surcharge (SWS) has been waived while an extra 40% Agriculture Infrastructure and Development Cess (AIDC) has been added. For high-end EVs, this yields an efficient import duty of 110%; those under $40,000 remain taxed at 70%.
Tesla’s Approach of Entry for India
According to reports, Elon Musk’s Tesla Inc. intends to join the Indian market via direct imports instead of pledging quick local manufacture. This action might throw off the market and force Indian producers to keep competitive in terms of cost, technology, and distribution.
Effect on Indian Vehicles
Major Fall of Mahindra & Mahindra
Falling to Rs 2,653, M&M shares had their largest single-day decline in almost seven months. Notwithstanding this, experts think Tesla might find it difficult to match M&M’s strong price, distribution, and service network in India.
Decline in Tata Motors and Hyundai
Hyundai Motor India dropped 2.5% to Rs 1,875; Tata Motors’ shares traded at Rs 676, down 2%. Investor concern brought on by the threat of more foreign competition has sparked selling off in car stocks.
Reaction of the Market
Nifty Auto Index Results
The Nifty Auto index dropped 2.5% trading at 21,534 at around 11 AM on February 21. Leading automakers include Tata Motors, M&M, Hyundai, Maruti Suzuki, and Bajaj Auto helped to lower the index. The Nifty Auto index has dropped about 6% starting the year.
Should one be worried as an investor?
Extended Viewpoint
Although changes in EV policies cause instability in the near run, Indian manufacturers are anticipated to adjust by improving their EV products. Companies like Tata Motors and M&M have already made large investments in electric transportation, which can provide them a competitive edge over global rivals.
Professional Notes
Geojit Financial Services claims that because of its expensive cost, Tesla might not immediately endanger well-known Indian names. One important market difference still is the great presence of Indian manufacturers in the reasonably priced EV category.
Although Tesla’s India debut and the changing EV legislation have set off short-term market reactions, long-term development prospects for local players still show great strength. Before deciding what to invest, people should pay great attention to industry trends and government statements. source moneycontrol
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