Tesla Manufacturing in India Hindered by Local Auto Firms' Speed Limiter

By Consultants Review Team Thursday, 18 January 2024

Domestic firms' resistance may cause Elon Musk's India debut to be delayed.  According to a top government official, New Delhi is still considering lowering import duties on electric vehicles (EVs) as part of a new strategy aimed at encouraging carmakers to commit to local manufacturing and easing Tesla's market entry.

Local automakers are apprehensive about the likelihood of Tesla entering the market. India has been working on a proposed legislation that would reduce the 100% EV import tax to as low as 15% for automakers who commit to investing and producing in India in the future.

Deliberations on the import tax began after Tesla stated that it wanted to create a plant in India to make an EV priced at $24,000, which is around 25% less than Tesla's current entry model. According to Reuters, Tesla has also requested lower taxes on more expensive models for sale in India.

Rajesh Kumar Singh, the chief official at the Department of Industry and Trade Promotion, stated at the World Economic Forum conference in Davos that Tesla would most likely try to bring cars to the Indian market in the $24,000 to $36,000 price range since "that's where the volumes" will be accessible.

"The issue is raising resistance from the domestic industry because they are also in that (EV price) segment," Singh said late on Wednesday.

"It's a very contested area and we've not been able to take a final call on this so far."

Singh did not identify any domestic manufacturers, but Reuters reports that Tata Motors, India's largest EV participant, and Mahindra & Mahindra have urged officials not to reduce EV import levies in order to shield local firms from Tesla's potential entry.

In an interview this week, Mahindra & Mahindra Managing Director Anish Shah advocated for an equal playing field for domestic and foreign EV automakers, stating that India must boost local manufacturing.

Tesla did not immediately respond to a request for comment after regular U.S. business hours.

Tesla initially attempted to enter India by seeking lower import duties, which Elon Musk described as the "highest in the world by far of any large country". That demand for taxation resulted in stalled talks with New Delhi in 2022. Tesla recently changed its attitude and promised to put up local production, as India had requested.

"There have been some discussions on whether you lower the tariff for a short period but he (Musk) also accepts fairly significant investment and domestic value addition criteria," Singh was quoted as saying by Reuters. This would allow Tesla to import a limited number of vehicles for a short period, but Musk would also be required to submit "cast iron commitments to invest in India, make in India," Singh said.


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