Silicon Valley-based Tesla is in talks with the government of India to temporarily waive off restrictions on the import of its high-end electric cars into the country until it builds a local manufacturing unit here.
“In discussions with the government of India requesting temporary relief on import penalties/restrictions until a local factory is built,” Elon Musk, billionaire visionary and CEO of Tesla, said in a Tweet on early Thursday.
India does not restrict the import of new vehicles into the country, but they do attract a custom duty as high as 119 per cent for a CBU (completely built unit). However, Musk is most likely referring to a waiver of the country’s 30 per cent local sourcing norm for setting up single-brand retail here.
Globally, Tesla controls the entire experience for customers, from manufacturing cars to selling them through its own stores, unlike traditional auto companies which engage dealers. Musk’s adamance on this has meant even today the company does not have stores in a few US states, owing to laws made to protect auto dealers there.
Earlier, Musk had earlier hinted that Tesla’s India entry could be delayed due to the country’s rule that 30 per cent of parts must be sourced locally. “...the supply doesn't yet exist in India to support that,” he had Tweeted.
Soon after the comments made headlines in newspapers across the country, the government reached out to Musk on the microblogging site clarifying that its policy does not mandate manufacturers to comply with any minimum local component sourcing norm. Several global companies including Apple are trying to get a temporary waiver from India’s local sourcing requirements.
While the government in the past had indicated that it might allow such a waiver for high-tech products, the IT ministry has been unable to define what high tech could be. Instead, the country has come up with a new electronics manufacturing policy, that asks companies to start off with just eight percent of local sourcing but then quickly ramping up that percentage.
Apple began manufacturing its entry-level iPhone SE at its unit in Bengaluru last month, with a small batch of units even hitting store shelves at the latter end of May.
Tesla’s electric cars might, however, be in a whole different league, combining cutting edge electronics with more traditional automotive manufacturing. Experts suggest that while Tesla might not set up a plant to produce its cars in India, it could set up a plant for making lithium-ion batteries which Musk has already said would make more sense for the country.
India’s high demand for renewable energy storage will also drive sales of Tesla’s batteries apart from just its cars. As for meeting with local sourcing norms for selling its high-end cars here, making the batteries in India could alone be enough. Despite the falling prices of lithium-ion batteries globally, Tesla says about half the cost of its cars still is for the batteries alone.