When Will Tesla Enter India? A Look at Roadblocks as Elon Musk Says 'Not Until...'

Tesla will not open a manufacturing plant in India, the auto giant’s CEO Elon Musk said on Friday while responding to a tweet. The billionaire said the prospect won’t materialise until Tesla is first allowed to sell and service imported cars in the country.

The statement has come more than a year after reports speculated that the American electric car major was planning to open a plant in the country’s southern region.

A Twitter user asked Musk for an update on the Tesla manufacturing plant in India. Responding to the tweet, Musk said: “Tesla will not put a manufacturing plant in any location where we are not allowed first to sell & service cars.”

As the wait for Tesla’s entry in India gets longer, News18.com takes a look at issues that stand in the way:

The Roadblock

Tesla and the Indian government have been in talks for almost two years to see whether there is a way for the electric carmaker to enter the country, but the dialogue hit a stalemate.

Last month, Union minister for Road Transport and Highways Nitin Gadkari said that if Tesla manufactures its automobiles in India, the company will gain as well.

He had also said in April that if Tesla is ready to manufacture its electric vehicles in India, there will be “no problem”, but the company must not import cars from China.

“If Elon Musk is ready to manufacture in India then there is no problem … Come to India, start manufacturing, India is a large market, they can export from India,” the minister said.

It should be noted that the government has demanded that Tesla commits to building a factory in India so that it may assemble automobiles locally, and that it pay high import tariffs until it does so if it wants to sell its cars.

But the auto giant has been looking for lower import duties in India so that it may test the market by selling cheaper imported electric vehicles before committing to a manufacturing base.

Currently, cars imported as Completely Built Units (CBUs) are subject to customs duties ranging from 60% to 100%, depending on engine size and Cost, Insurance and Freight (CIF) value less or greater than $40,000.

It was reported that for Tesla’s request for a reduction in import taxes on its vehicles to be considered, the electric automaker would have to commit to sourcing at least $500 million in auto components from India.

Additionally, it was said that Tesla would have to commit to increasing Indian parts purchases by 10% to 15% every year until they reached a satisfactory level.

Even Prime Minister Narendra Modi’s administration formally instructed the US automaker to increase local sourcing but didn’t provide the company with a procurement target, according to reports. Meanwhile, Tesla stated in August last year that it had sourced $100 million in parts from India.

But Tesla had already said earlier that it planned to test the waters by selling imported automobiles first, but tariffs as high as 100% would have to be reduced to make that feasible.

In February this year, Tesla’s call for lower taxes to import EVs was finally rejected and it was said that existing rules allow partially built automobiles to be imported and assembled locally for a lower charge.

Bid by States

In January this year, Karnataka Industries Minister Murugesh Nirani asked Musk to set up car manufacturing plants in the state. The minister took to Twitter to invite the auto giant to start operations in the state.

In a tweet, he said: “With over 400 R&D centres, 45+ EV start-ups & an EV cluster near Bengaluru, Karnataka has emerged as the EV hub of India.”

“Mr @elonmusk, Karnataka would be an ideal destination to set up @Tesla plant. Bengaluru is already Tesla’s maiden address in India”, he added.

Meanwhile, Tesla was invited to build a facility in Telangana, West Bengal, Maharashtra, Punjab and Tamil Nadu by the respective state governments. But now it is clear that the company has no immediate plans.

It is noteworthy that apart from the US, Tesla has factories in China. In March, Tesla’s first manufacturing site in Europe — Giga Berlin (or Gigafactory Berlin-Brandenburg) factory, which is in Germany’s Grünheide — was officially opened by Musk to reduce pressure from other factories.

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