US India Partnership Over Tesla Hits Roadblock

Last updated on February 18th, 2022 at 10:44 am

As per the sources, the talks between the USA carmaker Tesla and the Indian government have turned into a strange situation, as the government has asked Tesla to make a commitment for sourcing at least $500 million worth of auto components from India, for the request made by Tesla for cut in import duties on their vehicles.

In an earlier discussion, Tesla has asked India to lower the import taxes for their cars to be imported to India, in return, to this request, the government has their detailed plan for sourcing components and detailed business road map, before considering the request on tax cut from the US car maker.

It is expected that Tesla will start the sourcing from India at a lower rate, 10 percent to 15 percent, initially, before it could reach the expectations set by Indian government.

The request from the PM office has been officially been conveyed to the Tesla management to ramp up local purchasing, but the exact target is still not conveyed to the US carmaker. Though Tesla claims to have imported parts worth $100 Million from India in August.

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Tesla wants to test the India market first and then start to manufacture cars in India, therefore requesting for lower import duties. Where-as the representatives in Indian government has said that they are keen for the EV pioneer to come to India and start making cars, but it appears that they are using their interest to enter the EV Industry in India.

As per the current scenario, EV car market is just 1% of the total car market in India.

The import duty on cars is 100 percent in India, being the highest globally, where-as the components attract 15 percent to 30 percent, depending on the part.

In an interview with the CEO of Tesla, Elon Musk last month, he mentioned about his discussions and the challenges of working with the Indian government.

The government has made it clear in its discussions that Tesla has to share its

components sourcing plan in a bid to progress on its tax cut requests, which has to

be in proportion of its car sales in India. Adding to this, the representatives from PM office, also said that Tesla has to share the plans of import of made-in India

components to China, in case they plan to imports cars from China to be sold in India.