In the midst of an ongoing rift between Tesla and the Indian government regarding doing business in India, Telangana has thrown its hat in the ring.
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How It Began
Tesla’s Elon Musk had responded to a Twitter query regarding its entry into the Indian market to which he said that they are “still working through a lot of challenges with the government.”
The challenges he was referring to is the resistance by the government to reduce import duties on EVs.
He said that the duties are the “highest in the world by far of any large country.”
The government fired back by saying that Tesla wants import duties to be reduced so that it can sell in India without committing to local production.
Exorbitant Import Duties
India currently charges customs duty between 60% to 100% on imported cars.
100% duty is imposed on fully imported cars with CIF (Cost, Insurance and Freight) value over $40,000.
60% duty is imposed on cars costing less than that amount.
This means that there is only one car from its lineup that Tesla can sell in India without incurring 100% duty- the Model 3 Standard Range Plus- which is priced below $40,000.
On Indian roads, it would cost roughly around Rs 70 lakh.
Therefore, it is key for Tesla to get the government’s approval of its proposal if it wants to make its cars affordable in the country.
Telangana Extends Invitation
Telangana has offered Tesla, the world’s largest electric vehicle manufacturer, an invitation to set up its business.
Industry & Commerce Minister of Telangana KT Rama Rao said that he would be happy to partner with Tesla to set up its facility in the state.
He began by Tweeting to Musk, “Hey Elon, I am the Industry & Commerce Minister of Telangana state in India.”
He then espoused the virtues of his state as a “champion in sustainability initiatives” and called it a “top notch business destination in India.”
Unit Registered In Karnataka
Telangana has an EV policy in place along with a 200 acre EV park SEZ.
Tesla had shown signs of serious interest in doing business in India when it announced that it had registered itself as Tesla India Motors in Karnataka last January.
The government, however, wants Tesla to share its production plans first before committing to any of its conditions.
Local Production Comes First Or Sales?
It wants Tesla to start local manufacturing which would drive down costs.
This is in direct opposition to Tesla’s view in which it wants to test the market and gauge demand for its products through imports first.
If it gets an encouraging response, it could then start setting up local production facilities.
Musk’s argument against high import duty has sparked a debate among carmakers operating in India.
Some are in favor of Tesla’s proposal, while others want the government to offer equal treatment for Indian carmakers.