Decoding Elon Musk’s Terms: Tesla’s $2 Billion Commitment to India’s Plant
Written by Sanjay Kumar
Elon Musk’s Tesla Inc. is contemplating a substantial investment of up to $2 billion in establishing an electric car manufacturing plant in India. However, this prospective venture comes with a condition: Tesla is reportedly seeking a concessional duty of 15% on imported vehicles for the first two years of its operations in India, as per sources cited by The Economic Times.
The report suggests that Tesla has formally approached the Indian government, outlining its investment plans and the desired number of vehicles that could benefit from lower import duties.
According to the proposal, Tesla is prepared to invest $500 million initially if the government approves concessional tariffs for the import of 12,000 vehicles. This investment could potentially scale up to $2 billion if import duties are further reduced for 30,000 vehicles.
The fate of this proposal now rests in the hands of key governmental bodies, including the Department for Promotion of Industry and Internal Trade (DPIIT), the Ministry of Heavy Industries (MHI), the Ministry of Road Transport and Highways (MoRTH), and the Ministry of Finance, with guidance from the Prime Minister’s Office (PMO).
Reports suggest that the government is mulling over limiting concessional tariffs to 10% of the total projected electric vehicle sales in India for the fiscal year 2023, roughly amounting to 10,000 units. This limit could potentially increase by 20% in the second year. With India anticipating a significant surge in electric vehicle sales, reaching up to 1 lakh in the current fiscal year from 50,000 the previous year, the electric vehicle market appears to be on a growth trajectory.
Tesla’s entry into the Indian market is expected to include three models: the Model 3 ($39,000), the Model Y ($44,000), and a new hatchback ($25,000). Elon Musk, Tesla’s CEO, had previously expressed the company’s intention to make a “significant investment” in India, with plans to visit the country in 2024.
Recent positive signs include Commerce Minister Piyush Goyal’s visit to Tesla’s plant in Fremont, where he announced Tesla’s plan to nearly double purchases of auto parts from India to $1.9 billion this year, up from $1 billion last year. This signals a positive turn in relations between Tesla and India after a year-long impasse marked by disagreements over import taxes and EV policies.
The resumption of dialogues between Tesla and India in May, following Musk’s criticism of India’s high import taxes and its EV policies, indicates a renewed engagement and potential collaboration. India, in turn, had advised Tesla against selling cars in the country that were made in China, India’s political rival. The ongoing discussions and the proposed investment underscore the evolving dynamics between Tesla and the Indian market.
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