When Tesla Inc. officially formed its board in India early this year, people got excited in anticipation of soon-to-be-launch Tesla’s electric cars in India. Little did they knew that Elon Musk will have to face a unique set of challenges in the world’s fifth-largest country by the number of car sales.
When a famous Youtuber asked Elon Musk about the ETA (Estimated Time of Arrival) of Tesla cars in India, the latter responded that he wanted to do so, but heavy import duties in India are adversely affecting his plan of India debut. Elon Musk blamed India’s import duties on imported cars, which happen to be the highest on earth for a large country. He also expressed his unhappiness towards India’s treatment to clean energy vehicles like any other diesel or petrol cars, which is inconsistent with the climate goals.
Tesla Inc. has written to Indian ministries asking for a company-specific exemption on import duty for electric vehicles (EVs) in India. The move, however, is likely to fail as Apple made a similar appeal a few years ago but failed to attain any exemptions. The iPhone maker is now manufacturing some of its products in India to avail producer linked incentives (PLI).
Tesla Car Launch in India: Big Picture
- Musk’s Tesla Inc has been actively lobbying for import duty exemptions in India, but haven’t availed any success so far.
- As of now, India has two slabs of import duty on fully imported cars; 100% for the cars with CIF (Cost, Insurance, and Freight) value of more than USD 40,000, while 60% on those costing less than USD 40,000. This is the rate he thinks is too high for Tesla EVs, which are pro clean energy.
- India has been following its own set of rules which are pro domestic manufacturers. Pressure from domestic manufacturers is another reason why Tesla’s EVs are not likely to receive any exemptions.
- To push local manufacturing, the Indian government is actively introducing various schemes like Make in India. An apparent policy shift, just for Tesla, is unlikely, according to experts.
- The Indian government has also announced $4.6 billion incentive for companies to boost the production of electric vehicles in India.
- The government has hinted at Apple which asked for similar exemptions but is now producing four mobile phone models through contract manufacturers Winstron in Karnataka and Foxconn in Tamil Nadu, India.
- Musk is probably aware of this and this is the reason why he said to a Twitter user that if a temporary tariff relief is given to Tesla’s imported EVs and if it succeeds in the Indian market, only then the company might set up a factory in India.
- Tesla Inc had registered a local company in India in January, it has also ramped up local hiring in the country.
- Just last month Tesla kicked off the hiring process in India, posting various job roles for senior-level executives.
- In FY’20 over 242,000 Electric vehicles were sold in India. Two-wheelers accounted for 63% of the year sales.
- The sales of electric cars in India is yet to reach a significant number. However, it’s estimated that electric cars will account for 8% of new car sales in India by 2030, albeit much lower than the global share of 28%.
- India is estimated to take more than a decade to attain 30% electrification in cars.
Food for Thought
No matter what, being a true visionary, Elon Musk well understand the potential of the Indian market. With India’s affinity to clean energy and its products, any investment – even if that is required to set up domestic manufacturing in India – is likely to return profits in the future; especially when the government has promised that they will make manufacturing in India more conducive than it is in China, where Tesla Inc is manufacturing its cars right now.