Tesla Not Interested In Manufacturing In India: Union Minister HD Kumaraswamy

Elon Musk-led EV major Tesla is looking to start operations in India but is currently not interested in manufacturing in the country, Union minister of heavy industries HD Kumaraswamy has said.

“We are not expecting to see interest from Tesla. They are only looking to start operations through showrooms and are not interested in manufacturing in India,” Kumaraswamy said in response to a question while unveiling the guidelines for the Centre’s scheme to boost domestic manufacturing of electric cars.

Kumaraswamy said that the government is looking at attracting the likes of Mercedes Benz, Hyundai, Kia, and Volkswagen, which have already shown interest in manufacturing in India, under the policy – “Scheme to Promote Manufacturing of Electric Passenger Cars in India”.

The Centre approved the scheme in March last year to boost domestic manufacturing of EVs. Under it, global companies will have to pay lower duty on imports of electric four-wheelers (E4Ws) if they commit to invest INR 4,150 Cr (about $500 Mn) in India.

Under the scheme, global manufacturers will be allowed to import completely built-in units (CBUs) of E4Ws with a minimum CIF (cost, insurance and freight) of $35,000 at a reduced customs duty of 15% for a period of five years. The maximum number of E4W allowed to be imported at the aforesaid reduced duty rate shall be capped at 8,000 per year.

The companies, availing the benefit of the scheme, would have to set up a EV manufacturing unit and commence operations within a period of three years. They would have to attain a minimum domestic value addition (DVA) of 25% within 3 years and 50% within 5 years. 

The Centre will open the scheme for companies to send applications within a few days. 

Only global companies with a minimum annual revenue of INR 10,000 Cr from automotive manufacturing or a global investment company with minimum fixed assets of INR 3,000 Cr would be eligible to apply for the scheme. 

Tesla’s Turbulent Road To India

With the comment, the government has officially put a temporary halt on discussions regarding Tesla’s manufacturing plans for India. Earlier, it was reported that Tesla was planning to set up an assembly unit in Maharashtra’s Satara and its scouting team was in the country to find a location to set up a $2 Bn to $3 Bn EV manufacturing factory. 

However, Kumaraswamy reiterated that the company might soon set up its showrooms in India. 

“Whether Tesla will come to the country by sending its cars to India via US or China or via Germany, we don’t know yet,” he noted. 

Tesla is said to have finalised two locations for its showrooms in Delhi and Mumbai.

It is pertinent to note that Musk, in the past, cited India’s high import tariff as the reason behind Tesla not entering the world’s third largest automobile market. Earlier this year, Tesla’s Indian origin CFO Vaibhav Taneja said that India’s current tariff structure has been a major roadblock to the company’s entry. 

India charges a 100% tariff on imported cars with a CIF value of over $40,000 (over INR 34 Lakh). The new scheme was an opportunity for Tesla to make its foray into India and secure lower tariffs by making India a manufacturing hub. Tesla’s decision to not do so might also have something to do with Musk’s relationship with US President Donald Trump.

Recently, Trump criticised Tesla’s plans to manufacture in India, saying it would be unfair to the US. 

“Now, if he (Musk) built the factory in India, that’s okay, but that’s unfair to us. It’s very unfair,” he said during an interview.

It is imperative to note that India and the US are currently involved in negotiations to finalise a bilateral trade agreement. Earlier, it was reported that India would undertake a “significant” cut in its import tariffs for EVs as part of the deal.