Tesla in India: How the EV maker negotiated the roadblocks
India and Tesla have a complicated relationship. The two have been trying to court each other for a while without much success. Things may change soon, though. The meeting between Prime Minister Narendra Modi and Elon Musk seems to have put Tesla's India entry back on track. This is the perfect time to look back at Tesla's journey in the country.
Tesla has targeted India from 2019
Tesla's India dream dates back to as early as 2019. It was the same year the company started manufacturing at the Gigafactory in Shanghai, its first overseas manufacturing hub. The company wanted to enter India, but the country's high import duties proved to be a roadblock. As a result, Tesla decided to put its plan on hold, hoping things would change.
India levies up to 100% duty on imported vehicles
Before we take a look at what happened next, let's see India's import tax on vehicles. The country imposes up to 100% tax on completely built units (CBUs). It levies 60% on cars whose cost, insurance, and freight (CIF) value is less than $40,000. The tax is 100% for cars above $40,000. There is also a 10% social welfare surcharge on electric cars.
Tesla requested the government to reduce the tariff
Tesla tried to get the import duty down throughout 2021. The company's executives met with government officials to discuss a reduction in tax. They argued that a 100% tax would make their vehicles unaffordable in the country. For reference, the cheapest Tesla costs around $45,000. Tesla later requested the government to standardize the import tariff on electric cars to 40% and remove the surcharge.
Government welcomed Tesla to start manufacturing in India
The Indian government, however, wasn't forthcoming with Tesla's pleas. Instead of ceding to Tesla's requests, the government welcomed the EV maker to set up a manufacturing base in India. The government was ready to provide discounts and subsidies to Tesla, but it had a condition. The company must come to India and manufacture cars in the country.
Tesla wanted to sell cars before setting up manufacturing facility
What did Tesla think of the government's demand? "Tesla will not put a manufacturing plant in any location where we are not allowed to first sell and service cars," Musk wrote on Twitter. The company wanted to gauge the market before it set up a manufacturing facility. Both parties were not ready to change their stance. This resulted in an impasse.
Some Indian states tried to entice Musk
While the spat continued between the Centre and Tesla, a few states in India lined up to take advantage of the opportunity. Karnataka, Maharashtra, Punjab, Telangana, and West Bengal tried to entice Musk into setting up a manufacturing facility in their states. As expected, neither Tesla nor Musk was in the mood to engage them.
Tesla is absolutely interested in India, says Musk
Fast forward to now, the tension is easing between the Indian government and Tesla. Last month, a Tesla team visited India and held discussions with the government. Soon after that, Musk said Tesla is "absolutely" interested in India. Union Minister Rajeev Chandrasekhar affirmed that interest saying Tesla is "very seriously looking at India as a production and innovation base."
Tesla will be in India 'as soon as humanly possible'
After his meeting with Modi, Musk said Tesla will be in India soon. "I am confident Tesla will be in India and will do so as soon as humanly possible," he said. The Tesla CEO previously said the company could choose a location for a factory in India by 2023 end. His latest comments show the company is serious this time.
India could be the solution to Tesla's supply chain challenges
Tesla's arrival in India will be beneficial for both the company and the country. For Tesla, supply chain constraints have proved to be a real headache. A manufacturing facility in India could help the company overcome supply chain challenges. India's lower labor and manufacturing costs will also help Tesla slash its prices, taking the competition to its rivals.
Tesla's entry will uplift India's image as a manufacturer
For India, having a company of Tesla's pedigree in its stable is exactly the kind of statement it wants to make. A Tesla factory could show the world India's progress as a manufacturing hub. It will also provide a boost to India's electrification drive. Tesla's entry could have the same impact on the automotive ecosystem as Apple's did in electronics.
