Tesla good to come back, but on a level playing field
If Tesla begins manufacturing in India, it will boost both employment and the EV sector. However, Musk's badgering for India to bend the rules to accommodate Tesla’s demands should not be forgotten.
Tesla officials are all set to reopen talks with commerce minister Piyush Goyal to produce low-cost electric vehicles (EVs) in India. The Elon Musk company, known for its pioneering EVs and high-end expensive models, has seen the price-conscious Indian reality, and this time around, is pitching to make cars starting at Rs 20 lakh. This is a huge and welcome comedown from its earlier plans to import and market its base Model 3 at about Rs 60 lakh. Tesla’s ‘low-cost’ perspective is no concession to India but a U-turn in its own policy. The new policy hinges on bringing down the cost of Tesla’s models by up to 50% to ramp up volume and meet competition from other EV makers.
If Tesla begins manufacturing in India, it will boost both employment and the EV sector. However, Elon Musk’s badgering for India to bend the rules to accommodate Tesla’s demands should not be forgotten. After months of push-and-pull, Tesla decided to abandon its India plans last year after the government made it clear it would not relax its import duty structure for fully imported units. Tesla wanted to import its models from its Shanghai factory to test the market, insisting on a 40% duty compared to the generally applicable 60% for models priced below Rs 40 lakh.
The Union government rightly told off Musk that its import policies were made to encourage investment in India, and Tesla building an assembly plant to knock together imported models gave no benefit to the country. The Tesla story has now revived after Elon Musk met Prime Minister Narendra Modi on the latter’s recent visit to the US in June.
Meanwhile, India’s EV market is just 2% of the overall automobile market, but it is expanding rapidly. It also offers considerable choices from high-end BMWs at Rs 1.2 crore to the popular Tata Nexon EV at Rs 14.5 lakh, or even an MG Comet at Rs 8 lakh. Tesla will be pitching for a period of imports before setting up complete manufacturing in India. It will also want other concessions like cheap land. However, the commerce minister must ensure a level playing field between Tesla and the other domestic and foreign EV-makers. After all, Tesla’s pioneering days are over, and it is one among many—and that too in the luxe category.