Nitin Gadkari, the Minister for road transport and highways, has a clear message for Elon Musk’s Tesla. In a recent interview with ET, Nitin Gadkari said that Tesla is welcome in India, but if it manufactures locally. “We welcome Tesla to India. India is a big market with all types of vendors present here. If it manufactures locally in India, it will get concessions,” Gadkari said.
However, if the Elon Musk-led Tesla wants to manufacture in China and sell in India, then concessions would not be offered, Gadkari clarified. “…But if you make it in China and want to sell in India, then there is no concession policy available,” he said when asked about the thought process on Tesla plan’s to start manufacturing in India and the company’s demand for concessions.
Last week, TOI had exclusively reported that the Indian government is considering a policy framework aimed at high-end, technologically advanced vehicle manufacturers like Tesla. This framework is designed to promote domestic manufacturing, involving local sourcing, and entails a reduction in import duties on fully built units during the initial years, the report said.
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The plan entails a substantial reduction in import duties on electric vehicles, potentially as low as 15%, compared to the current peak of 100%. However, this reduction would be contingent upon carmakers committing to commence manufacturing operations in India, increasing local component sourcing, and providing bank guarantees to cover any defaults on their commitments.
The government is likely to seek firm commitments from companies to establish a supplier ecosystem, with the goal of sourcing approximately 20% of parts locally within the first two years, eventually increasing to 40% by the fourth year.
The bank guarantees would correspond to the value of the import duty reductions provided to the companies for bringing in their vehicles at subsidized rates. This measure would serve as a safeguard should companies fail to meet their commitments regarding local manufacturing and investments.
This represents a potential shift in the government’s stance on import duty rates, reflecting a desire to encourage companies with cutting-edge technologies to invest and manufacture in India. If implemented, this policy would provide a substantial advantage to companies like Tesla, BMW, and Audi, allowing them to enter the promising Indian market with their electric vehicles while test-marketing their imported models.
The primary objective of this move is to significantly boost the production of electric vehicles in India over the medium term. The government aims to attract Tesla to India and secure the company’s commitment to establishing a factory within the country, said sources quoted in the report. Tesla officials have engaged in positive discussions with the government regarding their plans for India, and Prime Minister Narendra Modi’s meeting with Tesla CEO Elon Musk has further facilitated this initiative.
Tesla has expressed its intention to establish a factory in India with an annual production capacity of 500,000 units, which would also serve as an export hub. The model range is expected to include vehicles with a starting price of over Rs 20 lakh.
While government officials maintain that the policy framework will benefit all players, both domestic and global, lowering import tariffs may pose a challenge to the green ambitions of companies like Tata Motors and Mahindra & Mahindra, who have made substantial investments in local electric vehicle manufacturing.
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If high-quality global models become available at competitive prices in India due to reduced import duties, it might lure luxury car buyers away from locally produced products.
