Govt Seeks Tesla Tie-Up to Boost India’s Role in Global EV Market

Tesla plans to debut its India operations in the near future with imported electric vehicles (EVs), but not with any immediate domestic manufacturing. Instead, the Indian government is interested in including the nation in Tesla's global value chain (GVC) without insisting on indigenous production from the very beginning.

“Tesla is not ready to set up a manufacturing facility in India as of now, but they will import directly. So the idea is that India can become part of its GVC (global value chain). They (Tesla) will start making spares and sourcing some components locally. If even 10 percent of Tesla’s production starts being manufactured in India, that is a step forward. The government’s idea is that excluding such EVs from the Indian market does not serve a purpose if they are not going to be manufactured domestically in the next five to seven years,” a senior government official said.

To make it easier for Tesla to enter, the Centre is mulling cutting import duties and relaxing EV import norms. Additionally, there can be more duty relief to attract international EV makers. Presently, complete EVs costing over $40,000 attract a 70 percent Basic Customs Duty (BCD), and a 40 percent Agriculture Infrastructure and Development Cess (AIDC), which gives an effective import duty of 110 percent. EVs that cost less than $40,000 still face a 70 percent import tariff.

Tesla will not qualify for the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), which provides reduced duties in return for local production commitments. As Tesla intends to start with imports and look at local sourcing in the future, it does not yet qualify under the scheme. The firm has been negotiating with the Indian government for years, with past talks revolving around local production. Tesla's initial presence will comprise stores in Mumbai and Delhi, the start of its interaction with Indian consumers and the wider automobile market.