Tesla enthusiasts in India were in for a rough ride when CEO Elon Musk announced that his company would not be manufacturing its electric cars in India.
Tesla enthusiasts in India were in for a rough ride when CEO Elon Musk announced that his company would not be manufacturing its electric cars in India.
the story So Far: Tesla enthusiasts have high hopes IndiaElon Musk – the CEO of the automotive giant – said on May 28 that his The company will not manufacture its electric cars in India unless it is previously permitted to be sold and served locally.
Mr Musk, who recently Offers to buy micro blogging site Twitter, informed a Twitter user that it is awaiting the approval of the Indian government to launch Starlink – a global broadband internet system. When another Twitter user asked when he would set up a Tesla manufacturing plant in India, Mr. Musk dashed hopes citing mismatch in sales.
Indian car enthusiasts often question Musk on Twitter about when Tesla cars will be made available in the country, but the central government has firmly maintained that the automotive giant should not ‘import cars from China’. Mr Musk has repeatedly highlighted India’s high import duties on vehicles as the biggest hurdle for Tesla, choosing Indonesia instead of India to set up its new manufacturing hub.
Tesla’s Asian ‘Gigafactory’
In 2018, Tesla established its first overseas car manufacturing center, called gigafactory 3, in Shanghai, China. It began production in October 2019, less than a year after construction began at the site. By 2021, this factory reportedly had production capacity of 500,000 cars per year and could produce a total of 450,000 units of Model 3 sedans and Model Y crossover cars in the same time frame.
according to a calculation Reuters Using data from the China Passenger Car Association, the number of cars produced at Tesla’s Shanghai factory is half that of the 9.36 million cars.
with the revival of COVID-19Shanghai was forced to stop production in April 2022. a. According to ReutersAccording to the report, local officials in Shanghai’s Lingang Special Area helped transport more than 6,000 workers to the resumption of production at Tesla’s Shanghai plant. The plant reopened on April 19 after a 22-day shutdown, the longest period since the factory opened in 2019.
per a China News Service report good, Tesla Ltd. has also started expanding its plant to add an additional annual production capacity of 4.5 lakh cars, bringing the Gigafactory’s annual capacity to one million vehicles. In May 2022, Reuters reported That Tesla may open a new plant, with plans to produce two million cars per year at the expanded Shanghai factory.
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Musk’s expansion plan in India
With a view to establishing his foothold in Asia, Mr. Musk wanted to set up Tesla factories in India or Indonesia. In January 2022, the Karnataka government welcomed Musk with open arms to start Tesla’s electric car production activities in India. Speaking to The Hindu, Karnataka Minister CN Ashwath Narayan Told Tesla had already set up a research and development facility in Bengaluru in January last year. “Karnataka will be happy and eager to offer him our full cooperation and support whenever Mr. Musk is ready to set up a manufacturing facility in India.”
Similarly, Telangana Minister KTRma Rao extended an invitation to Musk, tweeting, “Glad to partner with Tesla to work through the challenges of setting up shop in India/Telangana.” Apart from Karnataka and Telangana, ministers from Maharashtra, Punjab, West Bengal and Tamil Nadu have also invited Musk to set up Tesla plants in their respective states.
In response, Mr Musk urged the Center to roll back its 10% surcharge on electric cars and called for a cut in import duty. But the Union Transport Minister Nitin Gadkari clarified That if Tesla is set to manufacture its electric vehicles in India, it should not import cars from China. He said the manufacturer should start manufacturing before availing any tax concession in the country.
While addressing the Raisina Dialogue in Delhi on May 2, 2022, Shri Gadkari said, “If Elon Musk [Tesla CEO] Ready to manufacture in India so no problem. Come to India, start manufacturing, India is a big market, they can export from India.
With no success in import duties or surcharges, met Mr. Musk Indonesian President Joko Widodo will instead set up a manufacturing center in Indonesia. Mr Musk’s team and the Indonesian government have discussed the possibility of a SpaceX rocket launch site in the country, but no deal has yet been finalized. Resource-rich Indonesia offers cheap labor and is home to one of the world’s largest reserves of copper, nickel and tin.
Tax barriers for Tesla in India
According to the Society of Indian Automotive Manufacturers, currently, India imposes an import duty of 100% on cars whose cost, insurance and goods (CIF) value exceeds $40,000 (Rs 30.6 lakh).SiamIndia imposes an import duty of 60% on cars whose CIF value is less than $40,000. In addition, India also imposes a 125% import duty on used cars. In addition, India imposes a social welfare surcharge of 10% on electric cars.
Last year, Tesla Wrote to Ministry of Roads Stating that an effective import duty of 110% on cars with a customs value of over $40,000, is ‘prohibitive’ for zero-emissions vehicles. The US firm urged the Center to reduce the import duty on electric cars to 40%, irrespective of the customs duty value, and withdrew the additional 10% surcharge.
It also argued that its proposal would not affect the Indian automotive market as currently no Indian original equipment manufacturer (OEM) has produced a car with an ex-factory value – the selling price excluding taxes – above $40,000. above. Tesla also said that only 1-2% of cars sold in India were priced above $40,000. The Center has not yet accepted this proposal.
Import duties in China and Indonesia – manufacturing centers of Tesla
In comparison, China – the world’s largest automotive market – has imposed a 15% tariff on imported cars since July 2018. less than 25% earlier In June 2018 during the US-China trade war. As Chinese President Xi Jinping and then-U.S. President Donald Trump imposed retaliatory tariffs on their countries’ goods, China opted to impose an additional 25% tariffs on $50 billion in US imports—mainly US-made autos. and auto parts. The import duty was reduced after reconciliation talks between the two countries.
On May 31, 2022, the Chinese government announced that it would reduce taxes on cars costing less than 300,000 ($45,000) to 5% from June 1, 2022 – for Tesla and other major automotive manufacturers such as Volkswagen and Nissan. Easing taxation issues.
Similarly, in Indonesia – where Tesla is considering setting up an auto plant – the government 0% tariff is announced On imported electric vehicles to boost the country’s battery-based electric motor vehicle program for road transport.