Business India ×

Published on: Jan. 24, 2022, 4:15 p.m.
Competitive rivalry
  • Many states are wooing Tesla chief Elon Musk to set up shop in their states

By Rakesh Joshi. Executive Editor, Business India

Last year, Tesla Motors had sought a reduction in import duties in order to release its electric cars in India. In response, the heavy industries ministry had asked Tesla to first start manufacturing in India before any tax concessions could be considered. Elon Musk and the Modi government have been in talks for years, but disagreements over local manufacturing and import duties have led to an impasse, meaning Tesla still doesn’t sell cars in India, three years after showing definite intent. This is despite Tesla India Motors and Energy, the Indian subsidiary of Tesla Inc., receiving received approvals for seven of its electric vehicle variants for being roadworthy.

While Prime Minister Narendra Modi wants Tesla to set up a factory to sell locally and export, Musk has insisted on slashing import duties of as much as 100 per cent so that Tesla can first establish a market. It has offered to outsource some components till then. The company says it wants a cheaper price tag on its cars which is not possible due to the steep import duties. 

The impasse has now prompted at least four state leaders to make a pitch for the project. It all began when a Twitter user asked Musk when Tesla's “pretty awesome” electric cars would be made available in India. In response, the US billionaire said he was “still working through a lot of challenges with the government.”

The four leaders vying with each other to invite Tesla to set manufacturing plant in their states are led by K.T. Rama Rao, Telangana industry and commerce minister and son of the chief minister, who invited the CEO of Tesla  to set up shop in his state. He wrote, “Hey Elon, I am the Industry & Commerce Minister of Telangana state in India. I will be happy to partner with Tesla in working through the challenges to set shop in India/Telangana. Our state is a champion in sustainability initiatives & a top-notch business destination in India.” Telangana already has an electric vehicle policy, a 200 acre EV park SEZ and recently USA EV major 'Triton' announced an investment of Rs2,100 crore in the state.

Immediately, a clutch of other  state leaders piped up to offer their states as a possible new home for the American electric car company. So far, leaders from Punjab, Maharashtra and West Bengal have made offers.

Navjot Singh Sidhu, president, Punjab Congress Committee, who has been talking of a Punjab model of growth, invited Tesla Motors to set up his company's base in India in Punjab's Ludhiana. “Ludhiana will be made into a hub for electric vehicles with a time-bound single window clearance for investment in order to bring new technology to Punjab and create green jobs with the goal of sustainable development,” he said.

Mohammad Ghulam Rabbani, West Bengal's minister for minority development and madrasa education, tweeted at Elon Musk, "Drop here, we in West Bengal have best infrastructure and our leader Mamata Banerjee has got the vision. Bengal means Business."

In response, the BJP's IT cell in-charge Amit Malviya said on Twitter, “You might think it is a joke. But it isn't! West Bengal’s minister for Minority Affairs and Madrasa Education has made an offer to Elon Musk to come invest in West Bengal. His pitch will start with Mamata Banerjee’s record on post poll violence and end with Singur agitation?”

Finally, Jayant Patil, Maharashtra minister, invited Musk to set up a production unit in the state and assured him of all necessary help. He tweeted, “Maharashtra is one of the most progressive states in India. We will provide you all the necessary help from Maharashtra for you to get established in India. We invite you to establish your manufacturing plant in Maharashtra.”

The key issue being faced by the Musk-led company is the imposition of import taxes. Tesla has been lobbying the government to slash import taxes on electric vehicles and has requested a meeting between Musk and Modi.

The government levies a 60 per cent import tax on electric vehicles priced $40,000 or less, and 100 per cent on those priced above $40,000. In comparison, Tesla cars start at $44,690 (Rs33,41,780) in the US, meaning Tesla’s cars will face a 100 per cent import tax in India, hampering the company’s sales.

While Tesla has been requesting a reduction in import duties for some time now, Indian companies like Tata Motors have opposed such a move as it would incentivize imports and go against the country’s plans of boosting local electric vehicle manufacturing.

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