American electric carmaker Tesla, which has been seeking reduction in import duties to sell its vehicles in India, will not manufacture its products locally unless it is allowed to first sell and service its cars in the country, company founder and chief executive Elon Musk has said.
In a tweet responding to a user asking about Tesla setting up a manufacturing plant in India, he said, "Tesla will not put a manufacturing plant in any location where we are not allowed first to sell & service cars."
Last month, Union Road Transport and Highways Minister Nitin Gadkari had said if Tesla was ready to manufacture its electric vehicles in India then there was 'no problem' but the company must not import cars from China.
"It is a very easy alternative, if Elon Musk is ready to manufacture a Tesla in India, there is no problem. We have got all competencies, the vendors are available. We have got all types of technology and because of that, he can reduce the cost," Gadkari said.
In August last year, Musk had said Tesla may set up a manufacturing unit in India if it first succeeds with imported vehicles in the country. He had said Tesla wanted to launch its vehicles in India "but import duties are the highest in the world by far of any large country!"
Currently, India imposes 100 per cent import duty on fully imported cars with CIF (Cost, Insurance and Freight) value more than USD 40,000 and 60 per cent on those costing less than the amount.
The Indian government’s demands from the likes of Tesla were simple and straightforward: invest in India’s manufacturing capabilities. Tesla though wished to gauge consumer demand by importing vehicles from its two large manufacturing hubs, namely, China and the United States.
Inviting Tesla to start manufacturing in India, the Union Minister highlighted that India is a huge market, and infrastructure like ports are available to enable exports. “He is welcome in India. We don't have any problem, but, suppose, he wants to manufacture in China and sell in India, it cannot be a good proposition for India. Our request to him is, come to India and manufacture here,” Gadkari said.
Early speculation
In February 2021, Bloomberg had reported how the Karnataka chief minister had claimed that Tesla has picked the southern state with Bangalore as its capital for its first plant.
Tesla CEO Musk had then all but confirmed Tesla would enter India in January after months of speculation.
The world’s richest man on January 13 that year tweeted “as promised” in response to a report on a Tesla-focused blog that the automaker was in talks with several Indian states to open an office, showrooms, a research and development center -- and possibly a factory.
Several challenges
Despite the hype, Tesla’s foray into India may well prove challenging, Bloomberg noted. India had not yet rolled out the welcome mat for EVs like neighbour China, where Tesla set up its first factory outside of the US and now dominates sales of premium EVs.
EVs account for about 5% of China’s annual car sales, according to BloombergNEF, compared to less than 1% in India.
“Considering the price of a Tesla, Elon Musk probably won’t be able to sell an EV to most of the population in emerging economies,” said Pedro Pacheco, a Munich-based senior research director at Gartner Inc.
“However, looking at the size of the population and the potential for economic growth, Tesla will probably target a fast-growing group of affluent individuals that, in absolute terms, compares quite favourably to what we see in many developed countries.”
