Made-In-India Electric Cars Coming But They Won't Be Made-By-Tesla: Details
The Indian government has been working on making things easier for Tesla's proposed India entry. The recent policy amendments have set the winds in favour of the electric vehicle (EV) giant. The latest reports suggest that Tesla might not initially consider setting up a new manufacturing facility here, though its EVs will still be made in India. It is reportedly in talks with Indian EV majors to explore a contract manufacturing arrangement in the country. If these come to fruition, the production of Tesla models could be outsourced to another EV manufacturer.
Tesla's Contract Manufacturing Plans In India: What We Know Of It Yet
The U.S. EV giant has, as per sources, initiated preliminary discussions with multiple automakers in India, who are currently operating below full capacity, regarding a possible partnership in manufacturing.
“Tesla is expected to collaborate with an automaker that will handle the assembly and manufacturing of certain models for both domestic and select international markets," a source told the Republic World.
"Tesla's strategy will be similar to Apple Inc.’s approach in India's smartphone sector. Once the EV maker achieves significant sales volumes—especially after the launch of the Model 2—it will outsource assembly operations to a contract manufacturer or an Indian OEM," another added.
Sources familiar with the developments suggest that a Japanese and an Indian manufacturer are being considered. These discussions, however, are in an early stage and it remains to be seen how it pans out. We'll see progress only if both parties can arrive at mutually beneficial commercial terms. If it goes through, this will be the first instance of contract manufacturing that a U.S. carmaker undertakes in India.
From what we know of yet, the first Tesla models will be imported as Completely Built Units (CBUs) and the carmaker will not likely set up a greenfield operation in India in the first year itself.
The latest policy amendments require investments of at least $500 million to qualify for the 15% import duty slab- significantly lower than the current 110%. The EV giant thought of taking the contract manufacturing route for reducing capital spents and for a quicker time to market.
It looks like the current geopolitical developments in the United States have also influenced Tesla's decision to curb capital investments. President Donald Trump recently announced his intention to put an aggressive focus on bringing automotive manufacturing back to the U.S. He proposes to do this by levying tariffs on goods produced in countries outside of the U.S.
Trump had previously pointed out the high import duties levied by the Indian government, and asked for relaxation and a more hospitable environment for businesses. He even threatened to impose reciprocal taxes on goods imported into the U.S. from India, if the request wasn't considered. Bringing the slabs down to 15% is a move that the government of India made in response to this.
Tesla's global portfolio consists of Model S, Model X, Model 3, Model Y and the Cybertruck. Of these, the Model 3 and the Model Y will be the first to arrive on the Indian shores. Upon arrival, the Model 3 could have a starting price of Rs 30.35 lakh and the Model Y crossover could start at Rs 53.12 lakh, ex-showroom. This will place Tesla cars between mainstream electric vehicles and luxury EVs, in the Indian market.
India is a value-conscious and price sensitive market. The average selling price (ASP) of cars here is roughly $11,000 or 9.5 lakh rupees. Globally, however, it is $40,000 or 34.52 lakh rupees. Our market will thus be a tough test for Tesla.