Elon Musk, the CEO of EV giant Tesla Motors, announced the arrival of Tesla by next year, and people are extremely optimistic about it.
Elon Musk is a visionary and innovator; he has managed various great companies, and Tesla Motors is no different. Tesla Motors is the pioneer when it comes to electric vehicles. Although the concept of an EV is quite old, Tesla is the one company that showed the capability of electric vehicles and commercialised it. It became the inspiration for many vehicle manufacturers. It not only educated the world about green energy but also showed a robust solution for the future.
In a recent meeting with Prime Minister Modi, Elon Musk expressed his desire to launch Tesla in India, and the only efficient option for him at this time is to establish a manufacturing or assembly facility in India. The launch is even more likely now that Tesla has leased office space at Pune’s Panchshil Business Park in the name of its Indian subsidiary, Tesla India Motor & Energy Pvt Ltd.
Whether Tesla will come to India is still a question for many. The major question that arises here is what is causing such delays, issues, and hurdles in its arrival. Some foreign motor manufacturers like Hyundai, Toyota, and Volkswagen also use the Indian market to some extent, so why couldn’t Tesla?
In this article, we will discuss- ‘What is the major roadblock for Tesla coming to India?’ and ‘whether the roadblock is removed completely?’
The Roadblocks To Tesla
The major roadblock that prevents the entry of Tesla into India is the government’s policy and the import taxes.
India, undoubtedly, is a huge market for many foreign market players, and this is the core reason every big market player worldwide wants to leverage the market potential. Hence, a ‘quid pro quo’ demand from India stands fair and valid.
In return for providing this huge market, India has certain entry routes:
- Either company has to form a wholly-owned Indian subsidiary
- or a joint venture with other Indian companies
There is a very high import duty on fully assembled cars in India, which ranges between 60% and 100%. If they want to avoid the import duties, they would have to put a manufacturing plant in India with due process.
Although Tesla wanted to bring the duties down to some extent to explore and test the Indian market’s potential before starting the manufacturing firm, they faced a refusal from the Indian government to get this exclusive treatment.
Why Does Tesla Want To Invest In India?
Here comes the real question!
There are various reasons why any US company wants to invest in a developing nation like India:
Relations between the U.S. and China
U.S. companies have the majority of their manufacturing entities in China as it provides low labour costs, electricity, minimal government interference, infrastructure, and more benefits. However, in recent years, due to the trade war between US and China, coronavirus, and many other trade-influencing factors, companies have realised that their heavy dependence on China is not favourable.
So, these global companies started a search for alternatives to diversify, and countries like Vietnam, Bangladesh, and India came into play. These countries have very cheap labour (cheaper than China), inviting trade policies and scope for expansion. However, these shifts can’t happen in a day, they will take time but gradually, these giant American companies will hope to diversify their supply chain.
India is the most populous country in the world. This statement might look like a big issue for a small developing country, but this also implies the unexplored market potential in India. It is also one of the reasons why Tesla wanted to come to India.
Favourable government policies for investment
India is looking for foreign investors and has created favourable policies for them. Tesla may derive huge benefits from such policies.
Skilled and cheap labour
India is also known for manufacturing and its skilled labour worldwide. Tesla may yield huge benefits from such labour as it will reduce production costs and increase its profit and market share.
Emerging demand for EVs
Earlier, India was sceptical about EVs, but local players like Tata have helped Indians to gain trust in the EV sector, and people are ready to adapt to this new environmentally friendly change.
How Can India Benefit From Tesla’s Investment?
Let’s discuss the benefits now!
It isn’t like only one party will benefit from such deals. India will also enjoy some great benefits if Tesla finally comes to India. Some of the major benefits are:
Job creation: If Tesla comes to India, the country will have to establish a manufacturing firm. Such a step will hugely favour India in terms of job creation. India is a populous country with limited jobs. Tesla may bridge that gap to some extent.
Healthy competition: Healthy competition always benefits the customers; other auto companies will face tough competition, and customers will get good quality products at affordable prices.
Economic growth: Tesla’s investment will boost economic growth through exports, tax revenue, and create a brand image for India, inviting other countries to invest in India.
There are certain roadblocks on Tesla’s way to India due to Indian government policies. However, if this roadblock is removed due to mutual agreement between the Indian government and Tesla, this investment can bring fruitful outcomes for both parties.