The Indian government, led by Prime Minister Narendra Modi, has taken a clear stance on Tesla’s entry into the country. Tesla is welcome to sell cars in India. The only requirement that the Modi government wants to be fulfilled is for those electric vehicles to be manufactured in India as well. Currently, Tesla and its CEO, Elon Musk wants to sell cars in India desperately but want to keep their manufacturing base in China. What that means is that Tesla’s electric vehicles will be imported from China for Indian consumers. That, to the Modi government, is an outrageous and unacceptable proposition.
Speaking to News18, Union minister Nitin Gadkari has said that Tesla is welcome in India but manufacturing cars in China and selling them here is “not a digestible concept”. On Tuesday, Minister of State for Heavy Industries Krishan Pal Gurjar had said on the floor of the Lok Sabha that “the company (Tesla) wants workers from China and market of India. This is not possible in Modi government… our government’s policy is that if India market is to be used, job opportunities will have to be given to Indians.”
Nitin Gadkari, meanwhile, added, “Tesla is welcome in India, we don’t have any problem. Now his (Elon Musk’s) interest is to manufacture Tesla cars in China and sell them in India. We request him that you can start your plant here. We have all ancillaries available here, you can get quality production here and you can get good sales here. So, if you start here, you are welcome, no problem. But manufacturing in China and selling in India is not a digestible concept to all of us.”
The Modi government had also made it clear to Tesla that it needs to set up a manufacturing facility in India and begin domestic production of electric vehicles before any tax concessions can be considered for the company.
Tesla had been urging India to slash import taxes on EVs before it enters the Indian market. Presently, the country levies an import duty of 60% on EVs that cost $40,000 or less, and a 100% import duty on EVs priced above $40,000. So, in any case, Tesla EVs produced elsewhere and imported into India wouldn’t be competitive enough for the Indian market.
But allowing such exemptions on import duties would have hampered investments in India’s domestic EV manufacturing sector, which is presently booming with local automakers like Mahindra and Tata pumping major investments into it.
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Now, it is clear India won’t let Tesla produce vehicles elsewhere and sell them in India, without making any investments in the country’s EV manufacturing sector. Tesla will at least have to open an assembling plant in India if it wants to effectively access the humongous Indian market.
Last year, half of Tesla’s global deliveries came from China. The EV maker moved its export hub from Fermont to Shanghai. Ultimately, Tesla wants to produce 6,00,000 electric cars in China annually. At the same time, it wants to tap into India’s large automobile market. However, the Modi government is not willing to fuel China’s growth as an EV manufacturing hub at India’s expense. So, the choice for Tesla is clear – embrace India and abandon China, or forget about ever making your mark in the Indian market.