Vibrant Gujarat Global Summit: India nearing final agreement with Tesla for EV imports, plant setup soon, says report

Vibrant Gujarat Global Summit: Reports suggest an imminent agreement between India and Tesla Inc., enabling the American automaker to export its electric vehicles to India by next year and establish a manufacturing plant within two years, as per sources familiar with the negotiations.

An official announcement might be on the cards during the Vibrant Gujarat Global Summit scheduled for January, a source mentioned, opting for anonymity due to the confidential nature of the talks. Gujarat, Maharashtra, and Tamil Nadu are being considered for the potential factory location, given their well-established ecosystems supporting electric vehicles and exports, another source indicated.

Notably, Tesla is expected to initiate an initial investment of approximately $2 billion in the plant, with plans to expand purchases of automotive components from India to as much as $15 billion. The company is also considering producing certain batteries within India to reduce costs, as disclosed by one of the sources.

However, the decisions haven't been finalised, leaving room for possible changes in the plans, the sources emphasized. Elon Musk, Tesla's CEO, previously expressed intentions to make a substantial investment in India and revealed plans for a visit in 2024.Efforts to reach out to India's Ministry of Heavy Industries, responsible for overseeing the automobile sector, as well as the ministries of finance and commerce and industry, for comment remained unanswered. Similarly, there was no response from Tesla when approached for comment.

For Tesla, penetrating India, the world's most populous nation, signifies a significant opportunity, especially amid the rising demand for electric vehicles among the country's aspiring middle-class consumers. India's government, led by Prime Minister Narendra Modi, has been advocating for bolstering domestic EV manufacturing and expediting the adoption of cleaner transportation solutions.

Despite these endeavours, India's EV market hasn't witnessed substantial growth, with electric cars constituting only 1.3 per cent of total passenger vehicle sales last year, according to BloombergNEF. The reluctance of buyers to switch stems from the high initial cost of electric vehicles and a scarcity of charging infrastructure.

Tesla's direct car imports to India have been hindered by hefty tariffs. However, once the locally manufactured Tesla vehicles hit the market, there are expectations that they could be priced as low as $20,000, according to sources. Trade Minister Piyush Goyal, following his visit to Tesla's Fremont plant in California, indicated in September that Tesla plans to ramp up its purchases of auto parts from India, aiming to nearly double the figure to $1.9 billion this year. Last year, the electric carmaker procured components worth $1 billion from India, Goyal mentioned during an event in New Delhi.

This renewed dialogue between Tesla and India, the world's third-largest automobile market, comes after a year-long stalemate. Elon Musk had criticised India's high import taxes and EV policies while India advised Tesla against selling vehicles made in China, its political rival. Presently, India is contemplating reducing import duties for global EV manufacturers for a five-year duration, provided these companies commit to establishing local production facilities.

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- With inputs from agencies

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