India is determined to lure Elon Musk's Tesla (TSLA.O), opens new tab to set up a local factory to make electric vehicles. Yet slower global demand for pure electric vehicles strengthens the case for the world's third largest auto market to embrace hybrids like those made by Japan's Toyota Motor (7203.T), opens new tab.
Cars running on a mix of battery and gas are currently treated as luxury items and taxed domestically at over 43%, while locally-made EVs only face a 5% charge.
India's trade department has privately supported calls from Japanese automakers to lower taxes on hybrids. That looks smart, especially now that Tesla's shares have fallen 24% this year and Chinese carmakers are slashing prices to entice buyers.
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