Tesla will have to commit to sourcing at least $500 million of auto components from India in order to get an import tax cut on its vehicles.
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Increase Parts Purchases Every Year
It could start at a lower base but the company will have to agree to increase Indian parts purchased by around 10% to 15% a year until a satisfactory level is reached.
The administration has formally told Tesla to ramp up domestic sourcing but hasn’t given it a procurement target yet.
Tesla said in August that it sourced around $100 million in parts from India.
Govt Wary, Fears Losing Business To China
The government is interested in Tesla manufacturing in the country but is worried that it is using the market here and taking advantage of it.
Tesla says that it wants to gauge the response its cars receive by selling them first but can’t do so due to levies that reach as high as 100%.
As it is, India is a price sensitive auto market dominated by cheaper gasoline cars.
Clean transport remains a niche industry, with EVs just 1% of cars sold annually.
Make In India A Must
In order for the govt to consider its tax-cut bid Tesla will have to furnish a component-sourcing plan that’s proportional to its car sales forecast in India.
If it plans to import cars from China it must also export made-in-India components there.
India had earlier this month rejected Tesla’s call for lower taxes on import electric cars, saying that existing rules already allow partially-built vehicles to be brought in and then assembled locally at a cheaper levy.
States Extend Invites
Imported EVs attract taxes of as much as 100% but on parts shipped for assembly in the nation duties of between 15% to 30% apply.
While Tesla is facing resistance from the government, other Indian states are courting the carmaker by promising a streamlined approval process.
At least five states have invited the company to set up manufacturing plants in their provinces.