Tesla’s Path To India Almost Clear

After much deliberation and delay, Tesla is finally all set to enter the Indian market. In a shocking move, the Indian government has passed the new electric vehicle (EV) policy which offers import duty concession to EV manufacturers. The new policy aims to attract investments from global players like VinFast, Tesla and many Chinese manufacturers, while also promoting local manufacturing.
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New EV Policy: What Do We Know?

For a long time, global manufacturers have requested the Indian government the reduce import duty on CBU models and also include setting up of charging infrastructure as part of the investment. This would allow global players to import a limited number of models from their regional markets and sell directly in India. However local manufacturers like Tata and Mahindra opposed this idea suggesting the government focus more on local manufacturing and create a stronger domestic automotive industry. But the central government on 15 March 2024 approved the new electric vehicle policy with a catch.

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According to the new plan, manufacturers need to commit an investment of at least USD 500 million (Rs 4,150 crore) in the Indian market. These manufacturers are provided with a three-year window to establish manufacturing facilities and commence commercial domestic production of EVs. As an incentive for this investment, companies will be permitted to import 8000 examples at a reduced customs duty rate of 15 percent. This reduction in duty applies only to cars with CFI (cost, insurance and freight) value of USD 35,000 (Rs 29 lakh) for five years on successfully establishing local manufacturing. 

Additionally, the company will also have to achieve 25 percent localisation in production by the third year and 50 percent in the fifth year. The investment commitment shown by the company will have to be backed up by a bank guarantee to be eligible for the customs duty concession. The bank guarantee will be encashed in case of failure to meet the investment criteria at any given point. 

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New EV Policy: Tesla Entry

Initially, Tesla was looking to import cars from China to be sold in India. But with the new EV policy, the American giant is in talks with the Indian government to set up a manufacturing unit in Gujrat. This could mean that global models like the Tesla Model 3 and the Model Y could make their way to India as CBUs initially, before starting local assembly. Additionally, Tesla could also set up battery manufacturing units in India, which other manufacturers like Tata and Mahindra could take advantage of for their future EVs. Recently, VinFast also signed an MoU with the Tamil Nadu government for setting up a local manufacturing facility at a total investment of Rs 16,000 crore.

Are you excited about Tesla’s formal entry to India?

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