A hurdle in Tesla’s road to India: Import duty

Tesla

Responding to a tweet enquiring about Tesla’s plan to introduce its vehicles in India, the company’s CEO Elon Musk replied that he is in discussions with the government of India and has requested temporary relief on import penalties/restrictions until a local factory is built.

There is a lot of competition in India. Tesla needs to bring its prices down and launch its vehicles at a competitive price in the country. And one way of doing that is by finding ways to reduce the import duty on cars. Currently, the import duty on fully built units (FBUs) is as high as 100 per cent to 120 per cent, which makes the cars too expensive for sale in India.

However, Tesla has hinted on exploring the Indian market with launch of electric vehicles in the country. The company is in talks with component makers, including Germany’s Dräxlmaier Group and Italy’s Magneti Marelli, to source electric parts for its India venture, according to FactorDaily.

Besides, the Indian government has also planned to introduce around 6-7 million electric vehicles in the country by 2020, which will give a boost to the company’s plan for India.

In 2016, transport minister Nitin Gadkari had visited Tesla in California and proposed to Tesla to start a plant for production of its electric cars in India according to the media report. Prime Minister Narendra Modi had also visited the Tesla facility on his US trip in 2015.

In the past, Musk has showed his interest and also raised concerns about the Indian market through the social media platform. Last month, Musk tweeted that Tesla’s launch in India might be delayed because of local sourcing norms. “Maybe I’m misinformed, but I was told that 30 per cent of parts must be locally sourced and the supply doesn’t yet exist in India to support that,” Musk tweeted.

The government’s Make In India Twitter handle clarified and responded to Musk saying that there is no rule on foreign direct investment in automobile manufacturing that asks for a 30 per cent local sourcing of components.

In February 2017, Tesla founder Elon Musk had tweeted that Tesla Motors may launch their electric cars in India in the summer of 2017. It also started taking pre-orders from Indian customers for its Model 3 sedan in April 2016 after its global unveiling.

Image credit: Flickr

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