Tesla Likely to Build a Factory in India if Can Successfully Import Cars & Study Market

Photo: Tesla

Many countries have tried to attract the next Tesla factory. The company currently has factories in the USA and China, in its two largest markets. Another is being built in Germany and will supply the entire European market, which is Tesla's third-largest. However, India is also aiming to become a production site for the company. Tesla will consider this possibility if the government lowers taxes on imported electric vehicles, which will allow the manufacturer to assess real demand, Elon Musk said.

Tesla CEO Elon Musk recently responded to a tweet from an Indian YouTuber asking to launch car sales in the country as soon as possible. He explained that the launch is complicated by the fact that India has some of the highest import duties on cars in the world, even among the big countries. In addition, despite the government's stated climate targets, EVs are treated in the same way as diesel and gasoline. Undoubtedly, such an attitude upsets and prevents Tesla from entering India’s market.

We want to do so, but import duties are the highest in the world by far of any large country!

Moreover, clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India.

— Elon Musk (@elonmusk) July 23, 2021

Recently, anonymous sources revealed to Reuters that Tesla is lobbying the Indian government to lower taxes on imported electric vehicles. Tesla has sent a letter to Indian ministries asking for a significant reduction in import duties on electric vehicles, which should increase demand for them and generate revenue for the government. The California-based manufacturer said in a letter to the ministry and the country's leading think tank, Niti Aayog, that it would be more appropriate to lower federal taxes on imports of fully assembled electric vehicles to 40%. That compares with current rates of 60% for cars priced below $40,000 and 100% for those above $40,000.

India’s government has also previously called on Tesla to build a car factory in the country. Musk has now made it clear that this will not be possible until the local market has been studied. But, this will be done after the import of Tesla cars into the country begins.

If Tesla is able to succeed with imported vehicles, then a factory in India is quite likely.

— Elon Musk (@elonmusk) July 23, 2021

This position is justified. With the current taxes on imported cars, there is a possibility that Tesla vehicles will not be so popular, so it will be impossible to estimate the real demand. If the government tries to find a compromise with the manufacturer and lowers the tax on imported electric vehicles, then ultimately this could lead to Tesla building a production factory in India. After all, if the demand is high, then it will be more expedient for the manufacturer to produce cars on the spot, and not to pay 40% import tax.

 

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