Tesla no longer wants to build a plant in India despite incentives from the government

Tesla has no plans to manufacture cars in India, the country's heavy industries minister HD Kumaraswamy said on Monday. Instead, the US company intends to import electric vehicles into the country.

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India is the third largest car market in the world after China and the US, but the infrastructure for charging electric vehicles is almost non-existent there. Tesla's plans to build a gigafactory in India have been discussed for years. The country was seen as an ideal place to expand production due to its position in South Asia and rivalry with China. It would allow Tesla to diversify operations, which now rely heavily on the Chinese factory.

Negotiations have stalled over disagreements over taxes and liabilities. Tesla demanded lower import duties before committing to local production. Today, duties are as high as 110 per cent for cars from China and around 70 per cent for other countries. India, on the other hand, wanted guarantees to build the plant before lowering taxes.

A series of meetings between Tesla CEO Elon Musk and Indian Prime Minister Narendra Modi did not result in a breakthrough. Musk promised investment in India "as soon as possible" in 2023, but a planned trip in 2024 to sign agreements did not materialise. The last meeting in Washington in February did not involve Tesla.

On Monday, India announced a new policy to attract foreign automakers that was originally prepared for Tesla. Companies will be able to import a limited number of electric vehicles with a preferential duty of 15 per cent instead of the current 70 per cent. Terms of participation:

• Investment of about $500 million in electric vehicle manufacturing in India
• Commencement of operations within three years of approval
• Compliance with requirements to use local components

Tesla faced significant challenges while exploring the possibility of building a plant in 2023. Most of its suppliers are Chinese companies, and relations between India and China are extremely tense. Local supply chains for high-tech components, including batteries, motors and power electronics, are virtually non-existent in India. Tesla would have to create them from scratch.

Source: Reuters