Elon Musk's Tesla Prepared To Invest $2B Investment In Indian Factory, Awaits Import Duty Concession For EVs

This story was first published on the Benzinga India portal.

Tesla Inc. TSLA is keen on expanding its presence in India, but there's a caveat: a demand for a reduced import duty of 15% on its electric vehicles (EVs) for the initial two years. The success of Tesla's ambitious plan hinges on the Indian government's approval of this concession.

As per a report by the Economic Times, Tesla is prepared to invest a colossal $2 billion in a local factory, contingent upon the volume of cars it can import under this lowered tariff. The proposed deal? Should the Indian government approve a reduced tariff for 12,000 vehicles, Tesla is ready to invest $500 million. However, if the concession extends to 30,000 vehicles, the investment could soar to $2 billion.

The Indian government, on the other hand, is treading carefully. It is contemplating a reduction in the number of cars permissible under this preferential tariff, possibly limiting them to 10% of the total EVs projected to be sold in India this fiscal year (approximately 10,000 units), with a 20% increment in the second year.

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The delay in decision-making is attributed to Tesla's proposal, which also includes a pledge to localize up to 20% of the value of cars manufactured in India within two years. This proposal is currently under the rigorous scrutiny of several ministries, with guidance from the Prime Minister's Office.

Currently, India imposes a hefty 100% import duty on cars priced over $40,000 and 70% for those priced lower. The government may request a bank guarantee tied to Tesla's capital commitment as a safeguard, although Tesla is resisting this requirement.

Tesla intends to launch its Indian operations with three models: the Model 3, Model Y, and a new hatchback, anticipating a substantial increase in auto parts sourced from India. Amid industry apprehensions, the government assures that any incentives for EV production will be consistent for both foreign and domestic companies, emphasizing a sector-wide over a company-specific approach.

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