Nitin Gadkari, India’s transport minister, during a climate action forum on Oct. 8 said, that he had requested Tesla not to sell China-made electric vehicles in the country. He instead wants the now-Texas-based automaker to “produce cars in India, sell in India, and export from India.”
However, the path to these goals is paved with speed bumps. Elon Musk, the company’s CEO, has frequently turned to Twitter to express his dissatisfaction with India’s local sourcing regulations and hefty import tariffs. The company hasn’t been able to sell a Tesla in India for nearly five years, much alone manufacture. This is primarily because the government hasn’t provided the concessions that would tempt it to do so.
The Indian market is not very attractive right now for Tesla, which produced nearly two-thirds of the 568,000 electric cars sold in the United States between 2017 and 2020. Despite a few ardent early adopters who have been waiting in line for quite some time, India’s electric vehicle sector is still in its infancy. Indians purchased fewer than 5,000 electric four-wheelers in 2019-20. The costs are high, and there is a lack of charging infrastructure.
Why the deal between India and Tesla is still not sound?
In 2019, Musk tweeted, “I’ve heard that import duties on electric automobiles are extraordinarily high (up to 100 percent). This would make our cars unaffordable.” He is correct. Customs charge on fully manufactured imported automobiles costing more than $40,000—as Tesla does—is a whopping 100%.
These high barriers are meant to protect domestic manufacturers, but they may be too high for the price-sensitive market. Given the present price tag and taxes, even the least priced Tesla will likely set buyers back 55-60 lakh rupees (between $72,000 and $80,000), compared to the Rs 35 lakh ($) Gadkari estimates it will cost.
India recognizes the importance of electric vehicles in reducing air pollution and reducing its reliance on crude oil. Local production is the only option to make these cars inexpensive without import incentives. The 1.3 billion-strong nation has been attempting to entice Tesla with reduced production prices, hoping to capitalize on the world’s aversion to relying on China. A half-dozen Indian states have thrown out the red carpet for Tesla to build a factory.
However, the government appears to want to see precise manufacturing plans before giving the company any tax benefits.