Tesla must commit to buying at least $500 million worth of Indian-made auto parts if it wants its EV import tax cut to be considered by the government, according to sources.
According to Bloomberg, a person familiar with the opinion of the Indian government spoke about the demands that it’s putting on Tesla. If the American manufacturer complies with them, then the company's request for a reduction in the import tax on electric vehicles will be considered. The source said that Tesla will have to purchase locally produced auto components worth at least $500 million.
While parts purchases in India may initially start from a lower base, Tesla will have to agree to increase it by about 10-15% a year until a satisfactory level is reached, said the person, who asked not to be identified as the discussions are private. The source also said Prime Minister Narendra Modi's administration formally told Tesla to ramp up domestic sourcing but is yet to relay a procurement target to the company.
In August 2021, Tesla said it had purchased about $100 million worth of parts from India. Apparently, the country's government is using the allure of electric vehicles and Tesla's interest in the Indian market to try to capitalize on the nascent local electric vehicle industry. However, so far, it and the US company have not been able to reach an agreement. The import duty on cars is so high that Tesla will not be able to test the real demand for cars at prices that—if it had production in the country—it would otherwise be able to offer.
The source also said that the government wants Tesla to export components made in India to China if it plans to import cars from there. India has been embroiled in a long-standing border dispute with neighboring China and asked Tesla last year not to sell cars made at Giga Shanghai in India, according to Road Transport Minister Nitin Gadkari.
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About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.