Tesla, the famous American electric car company, is talking to the Indian government about lowering import taxes on electric vehicles (EVs). They want to see if there is enough demand for their cars in India before deciding to build a factory there.
Before, Tesla and the government couldn’t agree because the government wanted Tesla to build a factory first. But now, it is exploring manufacturing options in Southeast Asia where EVs are popular.
Even though Tesla is considering manufacturing in the region, they still need a tax exemption to figure out if people in India want their cars and if it’s feasible to set up a factory there. Tesla usually enters a new market by selling cars and building service centers before they start manufacturing. They have started exporting cars to Malaysia and are setting up charging stations and centers there.
People familiar with the situation say that Tesla’s manufacturing setup depends on seeing a big demand, no matter what the taxes are in a country. This is why they want to understand the market and infrastructure in India first.
Tesla wants to sell 20 million EVs globally by 2030, so they need to have more factories and sell cars in big markets like India. But their discussions with the Indian government right now are mostly about lowering import taxes.
Tesla has said that they want the taxes to be lower not just for them but for everyone. They think that once other car companies see that there is demand for EVs in India, they will also want to make cars there. So, Tesla entering India by importing cars is not a problem for Indian carmakers.
However, Tesla still plans to build a factory in India eventually. They don’t want to rely on imports. India is going to be one of the biggest markets for EVs by 2030, and Tesla wants to take advantage of that.
In 2021, Tesla started testing its Model 3 cars in India. The Model 3 is their cheapest car and costs about $40,000 in the US. But if they import it to India, they have to pay more than 100% in taxes. This is why Tesla wants the taxes to be lower, so they can make their cars more affordable in India.
Tesla has factories in only two countries outside of the US: China and Germany. These countries have a big market for EVs. But in India, EVs and luxury cars make up only a small part of the car market. In contrast, Tesla’s biggest market is the US, where they sell almost 14 million cars every year.
As Tesla continues to talk with the Indian government, what they decide will affect how Tesla enters the Indian market and helps the EV industry grow in India.
