Tesla's India Investment: Key ministries collaborate for swift entry of EV maker

The government is expediting the approval process to welcome Elon Musk's electric vehicle (EV) company Tesla to India as soon as January 2024, The Economic Times reported.

The Prime Minister's Office recently convened a meeting to discuss the future of EV manufacturing in India, which includes Tesla's investment proposal, it added. While the meeting was focused on policy matters, officials did prioritise the acceleration of approvals for Tesla's proposed investment in the country by January 2024, an official told the paper.

Multi-Ministry Collab

The ministries of commerce and industry, heavy industry, and electronics and IT have been in discussions concerning Tesla's plans after a meeting between Tesla CEO Elon Musk and Prime Minister Narendra Modi during the latter's state visit to the US in June. India has also invited US President Joe Biden to be the chief guest for the Republic Day celebrations on January 26, 2024.

A big Tesla announcement ahead of the Republic Day celebrations and Biden's potential visit could garner brownie points for the government, amid a focus on Make in India and Aatmanirbhar Bharat.

Tesla's India Plans

Senior Tesla executives have engaged in discussions with the Indian government to establish car and battery manufacturing facilities in the country, as per the report. Tesla is interested in bringing its supply chain ecosystem to India, it added.

Ministries and government departments have been instructed to resolve any differences with Tesla and expedite the announcement of the company's manufacturing plant in India, another official told the paper.

Sticking Points

Tesla had previously sought a 40 percent import duty on fully assembled electric cars, seeking a reduction from the current 60 percent rate applicable to vehicles priced below $40,000 and 100 percent on those priced above that. India's customs duty regime currently applies the same duties to both electric cars and those using hydrocarbons, aiming to promote local manufacturing.

A new proposal could include the introduction of a new category in the import policy to provide lower taxation for clean energy-driven vehicles. This incentive would apply not only to Tesla but to any entity committed to establishing EV manufacturing units, an official told the paper.

Tesla had previously abandoned its plans for India due to disagreements over import duty reductions. The Indian government insisted on a commitment to local manufacturing in exchange for import duty concessions and encouraged the company to apply for the production-linked incentive scheme, offering direct subsidies to manufacturers instead of customs duty concessions.