Tesla, under the dynamic leadership of Elon Musk, is set to establish its assembly plant in India ahead of the government’s prescribed deadline, signaling a significant stride in the country’s electric vehicle (EV) landscape. This move aligns with the government’s EV policy, which aims to incentivize global automakers to localize production and investment in India.
According to government sources, Tesla’s accelerated timeline for setting up its assembly plant in India is fueled by its commitment to source 30-40% of chips and forgings from the country. These components constitute a substantial portion of EV manufacturing, making local production a strategic advantage for Tesla.
India’s EV policy mandates manufacturers to achieve 25% localization by the third year and 50% by the fifth year, a target Tesla aims to surpass by leveraging its partnership with Tata Group’s semiconductor fabrication plant in Gujarat. With a reliable supply chain in place, Tesla is poised to meet these localization deadlines ahead of schedule.
Under the EV policy, global automakers importing completely built-up units (CBUs) above $35,000 will benefit from a concessional import duty of 15% for a five-year period. However, they must establish manufacturing facilities within three years to continue availing this incentive. For companies opting out of this route, CBUs priced over $40,000 attract 100% duty, incentivizing localization efforts.
Tesla’s commitment to invest in India comes with a minimum investment requirement of Rs 4,150 crore ($500 million), with no upper limit on investments. The duty foregone on imported EVs is capped at the investment made or Rs 6,484 crore, ensuring a balanced approach to incentives and investments.
To enforce compliance, companies must furnish bank guarantees against customs duty forgone, reinforcing the government’s emphasis on domestic value addition and minimum investment criteria.
Tesla’s decision to expedite its India assembly plant reflects the growing importance of the Indian market in the global EV landscape. With supportive policies and strategic partnerships, India aims to emerge as a key player in sustainable mobility, with Tesla leading the charge towards a greener future.
