Express View on Tesla in India: Charging up

In March, the Union government had approved a new e-vehicle policy with the aim to facilitate the entry of global EV manufacturers in the country. The policy involves lowering the duty for EV imports — this has been a long-standing demand for EV majors like Tesla — for companies setting up a manufacturing plant with a minimum investment of Rs 4,150 crore. Alongside, the policy also lays out clear localisation targets that companies have to achieve — 25 per cent by the third year and 50 per cent by the fifth — in order to boost domestic value addition. It would appear that this new policy is evincing serious interest. According to reports, US electric car maker Tesla Motors will be sending a team to India to scout for locations for a $2-3 billion electric car plant. This is welcome news.

Access to one of the largest and fastest growing markets in the world — India is the third largest auto market behind China and the US — at a time when others are slowing down, will be a big draw for electric vehicle manufacturers like Tesla. While the EV market is currently small in the country, it is gaining traction — in 2023, sales of electric vehicles surpassed 1.5 million, dominated by two-wheelers and three-wheelers as per a recent report by CareEdge. The scope for growth in various segments is immense, especially considering the government wants to increase the share of electric vehicles to 30 per cent by 2030. The reports also suggest the possibility of Tesla building a smaller and more affordable car in India, priced at less than $30,000. This would increase the likelihood of India being used as a base for the company to export its cars to other regions. Coming on the heels of the rapid expansion in Apple’s manufacturing capacity in the country, and movement in the government’s semiconductor plans, if  Tesla’s plans were to fructify, it would be a big boost for the government’s Make in India plans.

The entry of global manufacturers will not only provide greater choice to consumers, but will also help bring in the latest technology and promote competition in a sector that is dominated by domestic players. It will help cut carbon emissions and reduce the country’s dependence on oil imports. However, care must be taken to closely monitor progress on investment and localisation criteria, and not get swayed by attempts to relax targets in favour of the companies. Further, for increasing EVs’ attractiveness and ensuring its faster adoption, the focus should be on ensuring that the charging infrastructure ramps up quickly.