On March 2nd, Transport Minister Nitin Gadkari stated that India will be willing to offer added incentives to Tesla Inc as he claims the cost of production would be less in India as compared to China. Gadkari said that India is ready to make this move if the car-making company commits to manufacturing its electric vehicles in India.
Gadkari said in an interview, "Rather than assembling (the cars) in India they should make the entire product in the country by hiring local vendors. Then we can give higher concessions." However, he did not provide any financial details about the incentive offer.
"The government will make sure the production cost for Tesla will be the lowest when compared with the world, even China when they start manufacturing their cars in India. We will assure that," he added.
This pitch is presented weeks after billionaire Elon Musk's Tesla registered a company in India as a way towards entering the country. Sources say that Tesla plans to start by importing and selling its Model 3 electric sedan in India, possibly by mid-2021. India intends to reduce costly imports and cut down on pollution in its major cities by boosting local manufacturing of electric vehicles (EVs), batteries, and other components. This stems from the fact that carmakers globally are taking efforts to increase EV production and reduce carbon emissions across countries.
What challenges does India’s EV market present to Tesla?
India presents an EV market that is in its initial stage and accounts for just 5,000 out of a total of 2.4 million cars sold in the country last year. This is because buyers were discouraged by negligible charging infrastructure and the high cost of the EV’s. India also lacks an establishment of any detailed EV policy like China which is the world’s biggest automobile market. Hence, in comparison, China already hosts production for Tesla vehicles and accounted for more than a third of its global sales as it sold 1.25 million new energy passenger vehicles, including EVs, in 2020 out of total sales of 20 million.
Thus, India presents a big challenge to gain a production commitment from Tesla which has not immediately reverted to the email request that asks for its future plans in the country.
However, Gadkari assures that India is a promising market and can be an export hub, especially when around 80% of components for lithium-ion batteries being produced locally. Gadkari also added that he wanted to extend talks with Tesla about constructing an ultra-high-speed hyperloop between Delhi and Mumbai.
"I think it's a win-win situation for Tesla", says Gadkari.
Reuters reported, “India is drawing up a production-linked incentive scheme for auto and auto component makers as well as for setting up advanced battery manufacturing units, but the details are yet to be finalized.”
“Switching to cleaner sources of energy and reducing vehicle pollution are seen as essential for India to meet its Paris Accord climate commitments”, it added.
Last year, India enforced stricter emission rules for carmakers to be at par with international standards. It is now aiming to strengthen fuel efficiency rules from April 2022, which according to some industry executives may compel certain automakers to add electric or hybrid vehicles to their portfolios. Struck by the COVID-19 pandemic, the industry hence demands a longer time to make the transition.
Gadkari said that even though the decision to make the amends does not directly lie in his hands, he was positive that India would strike balance between its Paris treaty commitments and economic growth without any compromise.
"Development and environment will go hand in hand. We will take some time but we will soon reach the international standard norms," he stated.