Elon Musk-led Tesla’s foray and $2 bn investment in India comes with a catch

While Elon Musk-headed Tesla is planning to invest up to $2 billion in the country to set up a local factory, it wants something else in return from the government. The US electric carmaker is reportedly willing to put in the investment if the government approves a concessional duty of 15 per cent on imported vehicles during the company’s first two years of operations in India. 

As initially reported by Business Today, top government functionaries said that Tesla may be allowed to import fully built cars at a concessional import duty of around 15-20 per cent, much lower than the prevailing 100 per cent duty that such imports normally attract.

According to a report in The Economic Times, Tesla has approached the government with a detailed proposal linking the quantum of the investment with the number of cars it can import with lower duty. The report, quoting sources, said that Tesla is willing to invest $500 million if the concessional tariff is extended to 12,000 or up to $2 billion if it is extended for up to 30,000 vehicles. 

The government is believed to be examining the viability of the upper limit of $2 billion. However, the government is not too keen on extending the concessional tariff to a large number of cars and evaluating if the concessional tariff should be restricted to 10 per cent of the total EVs projected to be sold in the current fiscal year.

Tesla’s proposal is being evaluated by the Finance Ministry under the PMO’s guidance, Ministry of Heavy Industries, Ministry of Road Transport & Highways, and Department for Promotion of Industry and Internal Trade. 

Elon Musk has been vocal about India’s import duty of 100 per cent on cars with cost over $40,000 and 70 per cent for cars below it. He had previously expressed his willingness to enter the Indian market but highlighted the duty as a deterrent. 

A recent report by Bloomberg stated that Tesla is now on the verge of finalising a deal with the Indian government that would permit the company to import its electric vehicles into the country starting next year, as well as establish a manufacturing plant within a span of two years. The report suggested that Tesla is planning to invest around $2 billion initially in a new plant in India, as well as buy auto parts from India worth up to $15 billion. Nevertheless, these plans have not been finalised and could see some changes too. 

Another report, by Moneycontrol, stated that the company is aiming to launch its most affordable model in India. The Model Y Crossover, would be first launched in Germany at 25,000 Euros and then onto India.  

Also read: Tesla to set up factory in India within 2 yrs; start EV imports next year

Also read: Elon Musk-led Tesla’s most affordable car likely to be launched in India: Report