India is poised to make a strategic move to entice Tesla into establishing operations within the country. Part of the decision includes substantial cuts in electric vehicle (EV) import duties. An announcement is expected soon, and Tesla’s entry could catalyse for significant growth in India's EV industry.
Tesla could start shipping its EVs to India from early as January 2024, ahead of potentially breaking ground a “Gigafactory" in a yet-unknown Indian state.
$24,000 Made-in-India EV?
The potential states for consideration: Gujarat, Maharashtra, and Tamil Nadu, chosen for their well-established ecosystems supporting electric vehicles and exports.
Tesla is said to be in talks with New Delhi to eventually set up a new electric vehicle Giga-India to build a car priced around $24,000, according to Business Today.
Recognising the potential benefits of Tesla's entry into the Indian market, the Austin-based EV maker has been actively lobbying the Indian government for the past two years, urging a reduction in import duties.
A breakthrough of sorts emerged in June, when Tesla CEO Elon Musk expressed the company's intention to invest in India “at the earliest possible opportunity”.
This announcement followed a meeting between Musk and Indian Prime Minister Narendra Modi during the leader's visit to the US. During the Musk-Modi June meet-up, Musk declared: “I am a fan of Modi”.
Something more concrete may come of this admiration. And soon.
In August, Indian media reported that the Modi government was working on a "new" EV policy: by slashing import taxes for car companies that commit to some local manufacturing in a "win-win" equation. The move is seen as a key driver for EVs to hit mainstream in the sub-continent.
On November 14, during a Tesla California factory visit by India’s trade minister Piyush Goyal, the minister hailed Tesla’s ties with New Delhi and said the company was on track to double its imports of components from India.
India’s proposed import duty cuts are seen as a strategic move, it will not only attract global EV players but also bolster its own EV industry.
It is speculated that an official announcement towards this goal could be made during the Vibrant Gujarat Global Summit in January.
India’s EV market is in its infancy: Only around 47,000 units of electric cars were sold in the financial year ended March, though volumes are expected to double this 2023, according to industry estimates.
The adoption of EVs has been held back by the high cost of cars, a dearth of models and lack of charging options. The country’s EV landscape is dominated by two- and three-wheelers.
In 2022, electric cars accounted for just 1.3 per cent of India’s total car sales, according to Bloomberg NEF. In contrast, China accounts for nearly 59 per cent of the global EV sales volume.
Tesla could start exporting their EV models into India from early as January 2024. Then the company aims to elevate its commitment to India market by significantly increasing its purchases of auto parts, potentially reaching up to $15 billion.
To enhance cost efficiency, Tesla is exploring the possibility of manufacturing batteries in India, aligning with its strategy to optimise production costs.
In more concrete terms that form part of a new policy direction, the Delhi government is reportedly considering allowing international car manufacturers to import battery-powered vehicles at duty rates as low as 15 per cent, if they commit to eventually building them in India.
Such a move could face some pushback from local manufacturers. But the move presents a strategic opportunity for the industry, and the country, as a whole. And PM Modi, a self-described EV fan and hailed for his economic reforms, seems unstoppable.
The Times of India reported that the Prime Minister's Office has told relevant departments to fast-track Tesla's proposed investment in India by January 2024.
Given Tesla's reputation for innovation and cutting-edge technology, its presence in India could potentially elevate the country's standing in the rapidly evolving EV space, both in terms of software and hardware.
Why is Tesla special? It turns out it's not really Tesla that's special, but it's EVs in general, coupled with AI and advances in manufacturing, which together form a juggernaut disrupting transport and energy sectors.
China — where Tesla already hit 2 million units in its Gigafactory in Shanghai — is zooming ahead. China has the most vibrant EV ecosystem — with more than 94 brands cumulatively offering over 300 models ranging from just $5,000 to over $90,000.
And while a major policy change may mean one thing, the fact that key Tesla executives in the US have roots in India is another. Tesla’s director of autopilot software, Ashok Elluswamy, has made known his intention for the AI-driven “full self drive” system being developed by his team to “make it so good that it works as well as a local driver even in India.”
In a cost-conscious market, like India, lowering import duties will be vital to Tesla’s chances of success. It's a big move for India, and for the rest of the developing world.
The billions of dollars in potential investment is not merely monetary — it’s also technical, cultural and industrial, including the adoption of new processes involved in what amounts to welcoming the Apple of automakers.
More important, it symbolises a collaborative venture aimed at contributing to the burgeoning EV sector in the subcontinent, a potentially huge market of 1.428 billion people, while aligning with Tesla’s vision for accelerating sustainable transport.
Making it happen in the world's most populous nation (India has surpassed China's 1.425 billion population in 2021), would set a major milestone in the global EV drive.