Tesla, the renowned electric vehicle (EV) manufacturer led by Elon Musk, is reportedly poised to make a substantial $2 billion investment in establishing a local factory in India. This significant financial infusion, however, hinges on a critical condition that Indian government must approve a concessional import duty of 15% on Tesla’s vehicles for the initial two years.
Tesla’s Investment Strategy
The company’s strategy is intricately linked to the Indian government’s response. Tesla has put forth a detailed proposal that outlines a direct correlation between the scale of its investment and the number of cars it can import at a reduced duty. According to a report by the Economic Times, Tesla’s initial investment could be around $500 million, contingent on India granting a tariff concession for 12,000 cars. This investment could escalate to a staggering $2 billion if the concession extends to 30,000 cars.
Moreover, Tesla has expressed its willingness to significantly localize its operations in India. The company has pledged to ensure that up to 20% of the value of its made-in-India cars will be localized within two years, with plans to increase this figure to 40% over the next four years. This move is significant as it aligns with the Indian government’s ‘Make in India’ initiative, which encourages companies to manufacture their products in India. This localisation will not only reduce the cost of Tesla’s cars in India but also boost the local automotive industry, creating jobs and fostering skill development.
The Indian government, for its part, is carefully scrutinizing Tesla’s proposal, particularly the upper limit of the $2 billion investment. Officials are considering the feasibility of reducing the number of cars eligible for the proposed concession. One idea being floated is to apply a concessional tariff to 10% of the total EVs projected to be sold in India during this finncial year, with the possibility of increasing this percentage by 20% in the next fiscal year.
Tesla’s journey in India has been a topic of much speculation over the years. In 2020, the company announced its intention to build a manufacturing plant in India, but these plans were subsequently paused. Talks resumed in 2022, and in July 2023, Tesla representatives met with India’s commerce minister to discuss the construction of a factory for a new $24,000 car model. Maharashtra, Tamil Nadu, and Gujarat were being considered as potential locations for this facility at the time.
By when can you expect an answer?
Fast forward to today, this development comes amidst reports that Tesla and the Indian government were nearing an agreement to commence Tesla’s operations in India from 2024 onwards. While the specifics of the deal remain under wraps, an official announcement is anticipated at the upcoming Vibrant Gujarat Global Summit in January 2024.
Tesla’s entry into the Indian market is expected to begin with the launch of the Model Y crossover, marking the company’s first car model to be offered in the country. In addition to establishing a manufacturing presence, Tesla is also looking to strengthen its supply chain in India by doubling the import of car components from the country.