Tesla may put off India plans over local sourcing worries

Prospective Indian buyers of Tesla Motors' much-awaited Model 3 may have a longish wait, as Tesla chief Elon Musk has indicated his firm may put on hold its launch in the Indian market due to the 30 per cent local sourcing norms and absence of an ecosystem for the supply of electric vehicle components.

Responding to a query from Twitter user Avinash Singh on Tesla's Indian plans, Musk tweeted back, "Maybe I'm misinformed, but I was told that 30 per cent of parts must be locally sourced and the supply does not yet exist in India to support that."

Musk had stated last month that Tesla is likely to introduce its products in India in the summer of 2017, but he seems to have done a rethink.

Industry executives and government officials expressed surprise at Musk's reference to conditions for local sourcing, according to The Economic Times.

Sugato Sen, deputy director general, Society of Indian Automobile Manufacturers, said mandatory local sourcing requirements do not exist for auto firms.

He added that cars valued at less than $40,000 attract an import duty of 60 per cent. For cars valued over $40,000, the duty stands at 100 per cent.

"Semiknocked down units and completely-knocked down units attract import duty of 30 per cent and 10 per cent respectively," Sen added.

Minister for road transport and highways Nitin Gadkari had offered Tesla land near ports so that the company could set up a manufacturing unit in the country and make it an export base. Tesla is yet to commit to the proposal.

A government official told ET on Monday that the offer to Tesla was unconditional and there was no stipulation on local sourcing.

"We've offered them all help to support manufacturing here. The minister wants India to be Tesla's Asia manufacturing hub and the company was conveyed that during his visit to Tesla factory last year. We'll facilitate whatever help they need," a senior road ministry official said.

The official added that Tesla will get all incentives if it wants to manufacture batteries or cars here.

Tesla's eagerly awaited Model 3 will sell at $35,000 in the United States. Model 3, Tesla's third model after Model S and Model X, had several Indian car enthusiasts pay an advance of $1,000 on booking.

One of the imponderables in India is the ecosystem to enable electric cars to ply on Indian roads, especially charging stations. India has declared that by 2030, carmakers can only sell electric vehicles, which the International Energy Agency (IEA) termed as "ambitious" in view of the lack of infrastructure. (See: India, China's EV push makes IEA rethink oil demand).