The import duties stood at a hefty 100% for cars with a cost insurance freight (CIF) value exceeding $40,000, causing Tesla to request a reduction to 40%. The resulting high price tag, exceeding Rs 1 crore, made it challenging for Tesla to find a market in India.

In response, the government proposed that Tesla explore the option of assembling cars in India through the Completely Knocked Down (CKD) route instead of importing them from China, which had been Tesla’s original plan. The government emphasized the need for Tesla to bring down prices to make the vehicles more accessible.

Prior to these developments, Tesla had been exploring opportunities to expand its supply base in India. The company was working with the component manufacturers’ association to invite Indian manufacturers to a tech show in the United States, where they could discuss the specific components Tesla required from vendors.

However, these discussions were put on hold following Tesla’s decision to postpone its plans for India. Industry experts suggest that Tesla should consider adopting a strategy similar to Mercedes and Volkswagen, leveraging the CKD route to assemble Tesla vehicles in India while sourcing seats, tires, glass, and other internal components from the vibrant Indian component industry.

This approach would help reduce manufacturing costs significantly.
A seasoned CEO from a global car company pointed out that Tesla could easily acquire an assembly facility at a cost of no more than $100 million.
Tesla’s journey in India has been fraught with challenges. Two years ago, founder Elon Musk expressed his intention to enter the Indian market, registered a firm in Bengaluru for car imports, and discussed establishing company-owned retail showrooms.

However, Musk quickly realized that obtaining permissions would not be a smooth process. As a result, he abandoned the search for showroom space and reassigned the small team dedicated to India to other global assignments.

Musk has not concealed his dissatisfaction with India’s high import duties of 60-100% on electric vehicles, which rank among the highest in the world. He advocates for a significant reduction in duties as a prerequisite for Tesla’s entry into the Indian market. Additionally, he has criticized the treatment of clean energy vehicles, arguing that such vehicles should not be subject to the same regulations as petrol vehicles, which contradicts India’s climate change objectives.

The government, however, has remained firm, making it clear that Tesla would need to assemble vehicles within India rather than import them from China. Domestic manufacturers such as Mahindra & Mahindra and Tata Motors, represented by the Society of Indian Automobile Manufacturers, have opposed any duty reduction, citing unfairness given the government’s high localization standards for the Indian industry.