the story So Far: Defying the hopes of Tesla enthusiasts in India, Elon Musk – the CEO of the automotive giant – on May 28 said that his company will not manufacture its electric cars in India unless they are sold locally and manufactured by them. Service is not allowed.
Mr Musk, who recently offered to buy micro-blogging site Twitter, informed a Twitter user that he is awaiting Indian government’s approval 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 resurgence of COVID-19, Shanghai was forced to halt 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 per cent 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 per cent on cars whose cost, insurance and goods (CIF) value exceeds $40,000 (Rs 30.6 lakh).SiamIndia levies 60 per cent import duty on cars whose CIF value is less than $40,000. In addition, India also imposes a 125 per cent import duty on used cars. In addition, India imposes a social welfare surcharge of 10 percent on electric cars.
Last year, Tesla Wrote to Ministry of Roads Stating that the effective import duty of 110 per cent of 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 per cent, irrespective of customs duty, and withdrew the additional 10 per cent 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 per cent of cars sold in India cost more than $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 percent tariff on imported cars since July 2018.educated from the earlier 25% It was imposed in June 2018 during the US-China trade war. After Chinese President Xi Jinping and then-US President Donald Trump imposed retaliatory tariffs on their countries’ goods, China opted to impose an additional 25 percent tariffs on $50 billion in US imports—mainly US-made autos and auto parts. Are included. 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 yuan ($45,000) to 5 percent from June 1, 2022 – by Tesla and other major automotive makers such as Volkswagen and Nissan. Easing taxation issues for
Similarly, in Indonesia – where Tesla is considering setting up an auto plant – the government Zero percent tariff announced On imported electric vehicles to boost the country’s battery-based electric motor vehicle program for road transport.