On Monday, May 2, India’s Union Road Transport and Highways Minister Nitin Gadkari said Tesla would get benefits if it manufactured vehicles in the country.
“Tesla manufactures its electric vehicles in India, then they will also get benefits,” said Gadkari.
The transport minister has made other statements with similar sentiments in the past. On April 26, 2022, Gadkari said India had no problem with Tesla manufacturing EVs in the country. However, he made it clear that Tesla was prohibited from importing cars made in China.
“If Elon Musk is ready to manufacture in India, then there is no problem. Come to India, start manufacturing. India is a large market. They can export from India,” the transport minister said.
In 2021, Tesla sent a letter to India’s Road Ministry claiming that its import tariff of 110% on vehicles with customs value above $40,000 was “prohibitive” to zero-emission vehicles. As per The Hindu, Tesla requested the Indian government to standardize its tariff on electric cars to 40%, regardless of customs value. The EV manufacturer also asked the government to withdraw its social welfare surcharge of 10% on electric vehicles.
In February 2022, India seemed more open to considering Tesla’s request for import tax cuts. According to a person familiar with the matter, the government was willing to grant tax cuts if the EV manufacturer purchased $500 million worth of auto components from India.
Tesla’s factories rely on an integrated supply chain. In the case of Giga Shanghai, Tesla has established a local supply chain which has decreased costs. Elon Musk and CFO Zachary Kirkhorn also recently discussed rising logistical costs during the Q1 2022 earnings call.
“Yes. So, there were some inherent cost improvements, as I mentioned, but there’s also offsets that we’ve talked about previously on raw materials, commodities. Outbound logistics continues to remain a challenge despite a ton of efforts to increase capacity there and bring those costs down,” said Kirkhorn.
It is unlikely for Tesla to import $500 million worth of auto components to build cars in other countries. Tesla Giga Berlin will probably build out its own local supply chain, like Giga Shanghai.
As for the idea of a Tesla gigafactory in India, Elon Musk has stated that the company would need to test demand in the country first through imports. However, importing vehicles that incur heavy taxes might not provide Tesla with accurate data about demand in the country.