Tesla x India - What's on the line?
$Tesla(TSLA.US$ Elon Musk and India might finally be striking a deal, blending Tesla’s ambitions with India’s manufacturing goals. Prime Minister Narendra Modi has been eyeing a Tesla "gigafactory" to boost India's manufacturing, while Elon has been keen on lower tariffs for imported EVs to make Teslas more competitive in India.
On March 15, India unveiled a plan inviting companies to invest $500 million in manufacturing, offering the perk of importing 8,000 high-end vehicles at a reduced 15% tariff, which seems tailor-made for Elon and potentially others like Vinfast Auto from Vietnam.
This move isn't just about attracting big names like Elon but is part of a broader strategy. India believes in the power of "anchor investors" like Apple and now possibly Tesla, to not only invest but also to draw in other companies, creating an ecosystem around them. The government's approach mixes high tariffs with the lure of a growing consumer market, hoping to transform sectors with the help of foreign giants.
China's success in getting Tesla to set up a gigafactory there by relaxing rules shows the potential of such deals. For Tesla, starting with imports helps build necessary infrastructure like charging stations, paving the way for local production. India could further this by encouraging investment in interoperable charging to tackle the land scarcity issue.
Tesla's model of vertical integration, controlling most of its supply chain, gives it an edge in making localization commitments. The entry of players like Tesla, spurred by lower tariffs, could prompt local companies to push for reduced trade barriers to stay competitive, advocating for trade deals that would improve the overall business climate.
Here are some of the EV 4-wheeler companies that Tesla should expect to face-off:
India's industrial policy is betting on big names to transform sectors, but it's cautious. Companies taking up India's offer must provide a bank guarantee, ensuring they meet their investment and local sourcing promises.
It's a blend of trust and pragmatism, hoping to catapult India's manufacturing into the future with the help of global tech giants. Should China be worried?
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