Assemble here to cut cost: Minister to Tesla
NEW DELHI: Tesla’s plan to import cars to India on duty concessions has hit a roadblock. The ministry of heavy industries, which sets the policy for the country’s automobile sector, has told the US electric auto giant that the government does not favour a reduction in duties based only on an “intent to invest”.
The government has suggested that the Elon Musk-founded entity should begin its India business by starting with local assembly operations, and thereafter scale it up to full-fledged manufacturing. “Offering duty concessions when someone will consider investing after two-three years will be a reversal of a policy that we have followed for several years, and will be unfair to existing players,” a government source told TOI, adding that lower tariffs cannot be offered only to one company.
The government fears that an industry-wide cut in customs duty will result in import of electric vehicles instead of companies, such as Ola, setting up manufacturing facilities.
Tesla executives have been told that they should consider importing semi-knocked down (SKD) kits into the country and assemble them locally to attract lower duties, as opposed to importing completely built units. Tesla has told the government that it is already sourcing components from India for its global supply chain and proposes to scale it up.
Musk had recently pitched for duty cut in India, as the company prepares to start sales . “We are hopeful that there will be at least a temporary tariff relief for electric vehicles. That would be much appreciated,” he had said during a conversation on Twitter. India maintains over 100% duty on imported vehicles as part of a strategy to encourage companies to manufacture domestically, a strategy that has seen several car makers set up shop in the country. It wants to adopt a similar strategy for EVs, with some officials arguing that government’s stand against offering similar concessions to Apple a few years ago resulted in iPhone maker getting its vendors to set up manufacturing facilities in the country.
Several agencies such as NITI Aayog, transport ministry and the department for promotion of industry and internal trade are backing a cut in duties. But in the absence of support from the heavy industries ministry, the move is unlikely to go through.