Tesla's U-turn on India

With plans to import and sell cars off the table, Elon Musk's flagship is exploring the challenging prospect of an assembly plant for a cheaper electric vehicle

- SURAJEET DAS GUPTA

A senior Tesla delegation, mostly from its supply chain function, met officials at the Prime Minister's Office and the commerce ministry in New Delhi and, it is believed, executives of a Mumbai EV manufacturer over a two-day visit last fortnight.

Tesla's tryst with India has been on and off for over two years. In May last year, the Elon Musk-founded company decided following rounds of talks, letter exchanges with the government, and a plethora of tweets from Musk to shelve its India plans after it failed to convince the government to reduce high import duties so that it could test the waters by importing completely built units (CBU) cars.

Faced with tough opposition from Indian car makers, who contended that such a reduction would be unfair when there is a high localisation threshold for domestic competitors, the government asked Tesla to assemble the cars (completely knocked down or CKD operations) in India rather than import them from China as other global car companies such as Hyundai and Mercedes Benz were doing. The EV maker also failed to extract concessions for single-brand Tesla showrooms.

This time, multiple sources aware of the discussions said rather than CBU duty reductions, the Austin, Texas-headquartered multinational is looking for long term stability and clarity in the tax regime before investing in a CKD assembly plant. CKD assembly makes the car far more affordable, since the duty is 10 per cent against 70 per cent on the cost, insurance, and freight (cif) value of an imported car of less than $40,000 and 100 per cent on imported cars above $40,000. It is also looking at expanding its component supply chain from India and a possible lithium-ion battery unit.