Fight Between India And China Over Tesla Manufacturing

Minister of Road Transport and Highways, Nitin Gadkari has said that India is willing to offer incentives to US EV giant Tesla to make sure that its cost of production in the country is cheaper than that in China. The minister’s pitch comes weeks after the electric major registered itself in the country as Tesla India Motors and Energy Pvt Ltd in mid-January and also appointed three directors to lead its India’s arm.

The first model to be launched by the American giant in India will likely be the Tesla Model 3 sedan. The said car could be launched in India by the end of the first quarter of FY 2021 – 22. We expect the Model 3 to be introduced as a completely built unit (CBU) initially, and the car could be imported from Tesla’s Gigafactory in Shanghai, China.

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“Rather than assembling the cars in India, they should make the entire product in the country by hiring local vendors. Then we can give higher incentives,” Gadkari said in an interview, without giving details of what kind of incentives would they be. The government will make sure the production cost for Tesla will be the lowest when compared with the world, even China when they start manufacturing their cars in India. We will assure that, he added.

Last month, Karnataka’s CM BS Yediyurappa confirmed the opening of Tesla’s first manufacturing facility in the country, saying, “American firm Tesla will open its electric car manufacturing unit in Karnataka.” He also confirmed that the EV giant has set up an R&D unit in Bengaluru.

India wants to boost local manufacturing of electric vehicles (EVs), batteries, and other components to cut costly imports and curb pollution in its major cities. This comes amid a global race by carmakers to jump-start EV production as countries work towards cutting carbon emissions.

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But India faces a big challenge, its fledgling EV market accounted for just 5,000 out of a total of 2.4 million cars sold in the country last year as negligible charging infrastructure and the high cost of EVs deterred buyers.

In contrast, China, where Tesla already makes cars, sold 1.25 million new energy passenger vehicles, including EVs, in 2020 out of total sales of 20 million, and accounted for more than a third of Tesla’s global sales.

India also doesn’t have a comprehensive EV policy like China, the world’s biggest auto market, which mandates companies to invest in the sector.

Gadkari said that as well as being a big market, India could be an export hub, especially with about 80% of components for lithium-ion batteries being made locally now. I think it’s a win-win situation for Tesla, he said, adding he also wanted to engage with Tesla about building an ultra-high-speed hyperloop between Delhi and Mumbai.

India is drawing up a production-linked incentive (PLI) scheme for auto and auto component makers as well as for setting up advanced battery manufacturing units, but the details are yet to be finalised.

Switching to cleaner sources of energy and reducing vehicle pollution are seen as essential for India to meet its Paris Accord climate commitments. India last year introduced tougher emission rules for carmakers to bring them up to international standards. It is now looking at tightening fuel efficiency rules from April 2022, which industry executives say may compel some automakers to add electric or hybrid vehicles to their portfolios.

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