According to people familiar with the matter, Tesla is negotiating with the Indian government about the conditions for building a factory. The scale of investment will depend on the number of cars that India approves of importing at a preferential tariff of 15%. According to sources, Tesla’s condition is that Tesla is prepared to invest US$500 million if the Indian government approves a reduction in tariffs on 12,000 vehicles. And if the discount is extended to 30,000 cars, investment could soar to $2 billion.
On the other hand, the Indian government is considering limiting preferential tariffs to 10% of the total volume of electric vehicles expected to be sold in India in fiscal 2023, or 10,000 units, and may increase it to 20% of the total volume in the second year.
The delay in the decision was due to Tesla’s proposal, which also included a commitment to localize 20% of the value of cars made in India within two years. The proposal is currently being scrutinized by several ministries under the guidance of the Prime Minister’s Office of India.
Currently, India imposes a high import tax of 100% on cars priced above $40,000 and 70% on cars priced below $40,000. The Indian government may demand bank guarantees tied to Tesla’s capital commitments as backstop, although Tesla resists the request.
Tesla plans to launch three models in India: Model 3, Model Y and a new hatchback, and it expects a significant increase in the purchase of auto parts from India. Amid concerns in the industry, the Indian government has assured that any incentives for electric vehicle production will be consistent for domestic and foreign companies, emphasizing the approach of the entire industry rather than individual companies.
