The Indian government has opened doors for Elon Musk’s Tesla cars. However, it has set strong terms and conditions.
Nitin Gadkari has been pushing alternative fuels and EVs in India. On the other hand, Elon Musk’s Tesla is eager to enter the potentially huge Indian market. Despite several efforts by Tesla, it has not managed to make it to Indian shores. Now, the Indian government has invited the electric vehicle giant to India. However, strict conditions have also been conveyed to the company. In a nutshell, Elon Musk won’t be able to sell his Made-In-China electric cars in the Indian market.
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Concession Only if Manufactured Locally
In his latest statement, the Minister for Road Transport and Highways in India, Nitin Gadkari has made it clear that Tesla cars can avail concessions only if they are manufactured locally. It is to be noted that Elon Musk has been asking for a reduction in import duties for a while now. This has been a major roadblock to the company’s entry into the Indian market. Now, the Indian government has offered a good solution to the tech giant. Tesla can start local production to avail of incentives.
Recently, there have been healthy discussions between Tesla officials and the Indian government. Prime Minister Narendra Modi also met Tesla CEO Elon Musk earlier this year. The latest statement by Mr Gadkari is a clear message to Elon Musk. Tesla can make cars in China and sell them to Indian customers. However, they won’t receive any concessions in such a scenario. This statement is in line with the Indian government’s policy to promote manufacturing in India and reduce China’s investment in India. Meanwhile, Tesla is planning to establish a factory in India with an annual production capacity of 500,000 units. It will serve as an export hub.
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Current Government Incentives
To attract major manufacturers like Tesla, the Indian government has offered many incentives. This includes a reduction in import duties for fully assembled cars. During the initial years, import duties on electric vehicles could drop to as low as 15% (down from 100%). However, the reduced tariffs come with conditions like local manufacturing operations, local component sourcing (around 20% within the first two years and up to 40% by the 4th year), and bank guarantees (matching the value of the import duty reduction) to cover any defaults on their commitments.
The goal of the new policy is to push brands like Tesla, BMW, and Audi to bring their EVs to the Indian market. Along with electric vehicle production in India, the new policy will significantly add to Indian jobs and skilled personnel. While the new entrants will face heavy competition from Indian brands like Tata Motors and Mahindra & Mahindra, Indian customers will get more luxury car options at competitive prices. The upcoming Tesla factory is expected to manufacture cars with a starting price of over Rs 20 lakh.
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