Elon Musk’s electric vehicle giant, Tesla Inc., is exploring the possibility of establishing a manufacturing plant in India, contingent upon the Indian government approving a concessional duty of 15% on imported vehicles during the initial two years of operations. Sources suggest that Tesla has initiated discussions with the Indian government to outline its proposed investment and the potential import quantities subject to reduced duties.
Tesla’s Investment Proposal:
In a bid to solidify its presence in India, Tesla has put forth a substantial investment proposal of up to $500 million. This investment could materialise if the government extends concessional tariffs for an initial batch of 12,000 vehicles. Notably, Tesla has indicated a willingness to upscale its investment to a staggering $2 billion if import duties are further reduced for a larger volume of 30,000 vehicles.
Government Consideration and Evaluation:
The proposal is currently under evaluation by key government bodies, including the Department for Promotion of Industry and Internal Trade (DPIIT), the Ministry of Heavy Industries (MHI), the Ministry of Road Transport and Highways (MoRTH), and the Ministry of Finance, all operating under the guidance of the Prime Minister’s Office (PMO). The government is reportedly contemplating restricting concessional tariffs to 10% of the total projected electric vehicles sales in India for the fiscal year 2023, with a potential 20% increase in the second year.
Potential Impact on EV Market:
India witnessed a surge in electric vehicle adoption last year, with 50,000 EVs on the roads. Projections for the current fiscal year indicate a potential increase to 1 lakh electric vehicles. The government’s decision on Tesla’s proposal could significantly impact the growth trajectory of the EV market in the country.
Import Duty Landscape in India:
India currently imposes a 100% import duty on cars with a cost, insurance, and freight value exceeding $40,000, and a 70% duty on vehicles priced below this threshold. Tesla’s proposal seeks to navigate these duty structures to make its electric vehicles more accessible to the Indian market.
Tesla’s Model Lineup for India:
If the investment proposal materialises, Tesla plans to introduce its Model 3 (priced at $39,000), Model Y ($44,000), and a new hatchback ($25,000) in the Indian market. This move aligns with Elon Musk’s earlier commitment to make a “significant investment” in India, with a planned visit in 2024.
Commerce Minister’s Visit and Bilateral Relations:
Commerce Minister Piyush Goyal’s recent visit to Tesla’s plant in Fremont revealed the company’s intent to nearly double its purchases of auto parts from India, reaching $1.9 billion this year. This underscores a positive turn in the relationship between Tesla and Indian authorities, following a year-long impasse characterised by disagreements over import taxes and EV policies.
As India inches closer to a potential agreement with Tesla, all eyes are on the government’s decision regarding concessional duties. If approved, this move could not only pave the way for Tesla’s significant investment in the country but also have far-reaching implications for the electric vehicle landscape in India. The anticipated announcement in January will undoubtedly shape the future of Tesla in the Indian market and contribute to the ongoing global transition towards sustainable transportation.
