Tesla suspends India entry plan after impasse over lowering tariffs
What's the story
Tesla has decided to put on hold its plan to sell electric cars in India as it failed to secure lower import taxes. The company has stopped looking for showroom space and even reassigned some of its India team. The talks between the EV maker and the government reached an impasse after the latter pushed Tesla to commit to local manufacturing before lowering taxes.
Context
Why does this story matter?
The Tesla v/s Centre is an example of how two policies of the same government can be at loggerheads. The government's 'Make in India' dream and its quest to attract foreign investment are the policies in question. Tesla's plan to gain an advantage in India's relatively small but fast growing EV market seems to have reached an end, at least for now.
Reason
Government wants Tesla to commit to local manufacturing
Tesla's India plans involved importing cars from China and US and has hence been lobbying officials in New Delhi for over a year to get concessions on the high import tariff. The Centre, on the other hand, wanted the company to show its commitment to manufacturing locally before tax cuts. The government's persistence and Tesla's non-committal seem to have derailed the plans for now.
Information
New Delhi was not fond of importing cars from China
Tesla's plan to import cars from China did not sit well with New Delhi as it contradicted Prime Minister Narendra Modi's 'Make in India' initiative. Nitin Gadkari, the transport minister, said during a conference, "making in China and selling here is not a good proposition."
Lobbying
Tesla hoped to see some tax concessions in the budget
Tesla lobbied heavily in New Delhi to get past the stalemate. It reportedly set February 1, the date of budget, as the deadline to see whether its lobbying worked. However, the budget had no tax concessions for EV imports. Considering Indian import duty on vehicles can run as high as 100%, no tax cuts in the budget seemed to have irked the company.
Reaction
Tesla has reassigned its Indian arm to other regions
The continuing deadlock and high demand for Tesla vehicles elsewhere have made the company put its India plans on hold for the time being. It has even seized its months-long search for real estate for showrooms and service centers in key cities such as New Delhi, Bangalore, and Mumbai. The company's Indian arm has reportedly started working on the Asia-Pacific and Middle-East markets.
Aftermath
Tesla could be moving on from India
Back in January, Elon Musk had lamented the challenges of entering India's EV space. Now, it seems that India's loss could be someone else's gain. Musk met Indonesian President Joko Widodo to discuss potential investments and technology. There are rumors that Tesla may choose Indonesia as a manufacturing base in Asia. If so, it certainly is a lost opportunity for New Delhi.