India, the world’s third-largest automobile market, is expected to emerge as an electric vehicle battleground after the United States and Europe. This is because the Indian government, which has been sticking to high tariff barriers, has launched a drastic tariff reduction policy to attract global electric vehicle (EV) makers. As a result, Hyundai and Kia, which have been eager to enter the Indian market, need to hasten the launch of their electric vehicles in the Indian market, some experts say.
According to industry sources, the Indian government will grant tariff reduction to companies that will invest at least US$500 million and start producing electric vehicles in the country within three years. The policy took effect upon its announcement.
Eligible companies will be able to import up to 8,000 electric vehicles priced above US$35,000 per year into India at 15 percent duty. They can import at the reduced tariff for up to five years. Until the plant is completed, the Indian government will grant tariff benefits to imported vehicles.
This is a significant move for India, which has some of the highest tariff barriers in the world, making it difficult for global automakers to even enter the Indian market. India has been slapping 100 percent tariffs on imported electric vehicles above US$40,000 and 70 percent tariffs on the rest, depending on price.
The Indian government’s change in stance in three months is attributed to Tesla’s persistent request to the Indian government, which refused to consider any tariff cut until late 2023. Tesla has been courting India for years, offering to invest heavily in the country, including building a factory in exchange for lower tariffs, but opposition from local companies thwarted Tesla’s attempt.
Tesla is expected to see other EV makers in the Indian market. They include Vinfast and BYD, which have been attempting to break into the Indian market. Tesla has previously announced that it will invest US$2 billion in India. Vietnamese EV maker Vinfast is also expected to invest US$2 billion in a plant in Tamil Nadu, India. China’s BYD, which has already invested US$200 million in India and has a presence in the country, is also expected to consider making further investment in response to the tariff cut.
This will put Hyundai Motor Group controlling Hyundai and Kia under pressure. The two Korean carmakers had already entered the Indian market early and expanded its presence in India. While Hyundai Motor Group has already grown to become the second-largest automaker in the country, it is not easy to predict its success or failure in the electric vehicle market of India as it is still in its early period.
In fact, most of Hyundai’s and Kia’s sales in India are centered on cars powered by internal combustion engines. Their combined share of the Indian market in 2023 was 20.9 percent with sales of 860,000 units. Therefore, Hyundai Motor Group ranked second overall behind local company Tata Motors (13.4 percent).
In terms of EV sales, however, Hyundai sold 1,428 units and Kia just over 400 units in 2023. These numbers are not even close to the number of units sold by the likes of BYD (2,038) selling only two models in India. Tata Motors remained the top EV seller in India by selling 69,153 units in 2023.
Hyundai sold 162 electric vehicles in India in January while Kia just 35. Considering that Tata Motors sold 5,591 units and MG 1,162 units in the same period, Hyundai Motor Group’s share of the Indian EV market is far below that of the internal combustion engine market.
Hyundai currently sells two EV models in India, the IONIQ 5 and the Kona EV, while Kia only sells the EV6. According to local media outlets, Hyundai is considering moving up the launch of its small electric SUV, the Creta EV, to the second half of this year from 2025.