The Govt of India and Tesla have been in talks over letting the latter commence its operations of EVs in our market for a few years now. There have been multiple instances where the talks have been conducted both in India and the US. In fact, Elon Musk met PM Modi on the latter’s US trip earlier this year. Thereafter, Musk announced that Tesla have plans for a significant investment in India. However, Tesla has been keen on asking the government to lower the import duties so that it could price its EVs relatively competitively. That might be about to happen on one condition.
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Govt Could Help Tesla in India
As per the latest details, the government has asked Tesla to agree to start working on local manufacturing. This will be part of the upcoming EV policy. That will boost the local economy. Not only that, it wants the local components for Tesla to hail from India too. To ensure this, Tesla must provide bank guarantees toward any faults in their commitments. If it does that, the Govt is could consider lowering the import tax on cars above $40,000 from 100% to as low as 15%. That will have a huge impact on the final selling price of the CBU car. This could pave the way for Tesla to set up its gigafactory in India to supply to the world, as well as commence its operations in the country.
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A person close to this matter confirmed, “The government will also take guarantees from the companies towards creating an ecosystem for suppliers, with around 20% of parts being sourced locally in the first two years which would go up to 40% by the fourth year.” This is a clear indication that India wants to leverage its position to ensure that Tesla boosts the local economy if it wishes to expand its market share and manufacturing prowess. It might also want to shift its operations away from China. Here, India emerges as a great alternative.
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What We Think
This new EV policy could open doors not just for Tesla, but all other carmakers who are willing to set up manufacturing in the country. In fact, the existing automakers like BMW, Audi, and Mercedes can also prevent importing CBUs to India and consider going local. That will, ultimately, benefit the local population in terms of lower retail prices for luxury cars, as well as generating employment for the future. We shall keep an eye out for the latest developments in this space.
