Tesla and India edge closer to deal for electric car imports in 2024. Furthermore, there is talk of the possibility of Tesla establishing a factory in the country within the next two years.
The information on Tesla and India EV deal comes from individuals familiar with the thoughts of the Indian government. There might be an announcement about this at the Vibrant Gujarat Global Summit in January, as per an unnamed source who wishes to remain confidential.
The states involved in these discussions include Gujarat, which is the home base of Prime Minister Narendra Modi, and Maharashtra.
Requests for comments from representatives of India’s Ministry of Heavy Industries, responsible for the automobile sector, as well as from the ministries of Finance and Commerce & Industry, have gone unanswered.
Similarly, Tesla has not responded to a request for comment on the matter.
Tesla eyes $2 billion investment for setting up the Indian plant
According to one source, Tesla is considering an initial investment of approximately $2 billion for any plant. Additionally, they plan to boost their procurement of auto parts from the country, aiming for a total of up to $15 billion.
The US automaker is also exploring the possibility of manufacturing some batteries in India to reduce costs, as mentioned by the same source.
The information provided by sources highlights that no ultimate decision has been reached, and the outlined plans are subject to change.
Elon Musk, the CEO of Tesla, mentioned in June that the company is contemplating a significant investment in India. He also expressed his intention to visit the country in 2024.
Challenges in expanding India’s growing electric vehicle market
Entering the world’s most populous nation, where there is a rising demand for electric vehicles among the aspiring middle class, would be a significant advantage for Tesla.
In May, Tesla and India, the world’s third-largest automobile market, resumed discussions after a year-long standstill. Elon Musk has voiced concerns about India’s high import taxes and electric vehicle (EV) policies. Conversely, India has advised Tesla against selling cars in the country that are manufactured in China, which is its political rival.
Currently, Tesla operates factories in the US, China, and Germany. Meanwhile, the government led by Prime Minister Modi is actively promoting the expansion of domestic electric vehicle manufacturing and striving for a faster adoption of cleaner transportation methods.
Despite the government’s efforts, the electric vehicle (EV) market in India has not gained significant traction. Only 1.3 per cent of total passenger vehicles sold last year were battery-powered cars, according to BloombergNEF.
The slow adoption is attributed to buyers’ reluctance, mainly driven by the high upfront cost of electric cars and a shortage of charging stations.
Due to substantial tariffs, Tesla currently avoids direct imports of cars to India. However, once the locally manufactured Tesla cars become available for sale, there’s a possibility that they could be priced as low as $20,000, according to sources familiar with the matter.
Piyush Goyal shared Tesla’s intention to purchase more auto parts
Trade Minister Piyush Goyal, who recently visited Tesla’s plant in Fremont, California, shared in September that Tesla has intentions to nearly double its purchases of auto parts from India.
He also noted that Tesla is aiming for a total of $1.9 billion worth of components for the current year. Last year, the electric carmaker procured parts worth $1 billion from India, as stated by Minister Goyal during an event in New Delhi.
There are also reports suggesting that India is contemplating a reduction in import taxes for global electric vehicle (EV) manufacturers for a five-year duration.
This consideration comes with the condition that these companies make a commitment to establishing local factories in the country.
Tesla and India in talks for lower import duties on electric cars
According to a report from an English Daily, Tesla has reportedly reached out to the Government of India. Tesla and India are said to be discussing investment plans and the possibility of importing a certain quantity of cars at a reduced duty.
Tesla Inc. has put forth a proposal to invest a maximum of $500 million, contingent upon the government extending a concessional tariff for 12,000 vehicles.
Furthermore, there are indications that the company might consider boosting its investment to as much as $2 billion for a plant in India if the import duty is lowered for 30,000 vehicles.
At present, the proposal is under assessment by various governmental 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. The evaluation is being conducted under the guidance of the Prime Minister’s Office (PMO).
According to the report from ET, the government is considering a limitation on concessional tariffs. Initial plans are to cover up to 10% of the anticipated total electric vehicle sales in India for the fiscal year 2023, which amounts to 10,000 vehicles. Furthermore, there is contemplation of a potential 20% increase for the second year.