Tesla, a leading EV manufacturer, has started producing right-hand drive cars for the Indian market in its Berlin factory. The company is also scouting locations in India for manufacturing vehicles for the wider developing world.
Elon Musk-owned Tesla has started producing right-hand drive cars for the Indian market at its Berlin factory, according to a report by the Hindustan Times. The company plans to have these cars on Indian roads later this year. In addition, Tesla is sending a team to India in the third week of April to scout for locations for its manufacturing plans.
This comes after the Indian government announced its new EV policy last month, which reduces custom duties on EVs and links it to a manufacturing investment commitment. Tesla is considering Gujarat, Maharashtra or Tamil Nadu as potential sites for its plant. The company also plans to make a significant foreign direct investment in India, including a tentative direct and immediate investment of $3 billion.
Meanwhile, Tesla has begun producing a limited number of its standard brands in Germany to compete in the Indian market and test a charging ecosystem. Tesla’s move towards India has been under progress since the last few years but the company has been facing headwinds in the form of high import duties. However, Tesla is also facing pressure from mounting competition in China, one of its biggest markets from brands like BYD and even Xiaomi with its latest SU7 EV.
India’s new EV Policy
The Indian government finalised a new policy to boost the manufacturing of electric vehicles (EVs) within the country. This initiative aims to make India a favored destination for the production of EVs. According to the government, this policy is expected to bring multiple benefits, such as giving Indian consumers access to the latest EV technology, promoting competition, reducing production costs through economies of scale, cutting down crude oil imports, decreasing the trade deficit, and contributing to a cleaner environment by reducing air pollution.
Here’s a simplified breakdown of what this policy involves:
Minimum Investment: Companies interested in manufacturing EVs in India must invest at least Rs 4,150 crore (about $500 million). There’s no upper limit on how much they can invest.
Timeline: Companies have three years to set up their manufacturing facilities in India. Once set up, they should start producing EVs commercially. Additionally, within five years, these companies must ensure that at least 50 per cent of the vehicle’s value is derived from components made in India.
Domestic Value Addition (DVA): The policy requires that the EVs manufactured must gradually use more locally sourced parts. Specifically, 25 per cent of the vehicle’s parts must be made in India by the end of the third year and 50 per cent by the end of the fifth year.
Import Benefits: To help companies transition, the government is allowing them limited privileges to import EVs at a lower custom duty of 15 per cent for five years, on the condition they meet the setup timeline and investment commitments.
Import Limit: The number of EVs a company can import under this scheme is directly tied to the amount they invest. The maximum number of EVs allowed is 40,000 over five years, with an annual cap of 8,000, provided the investment is $800 million or more. Unused import quotas can be carried over to the next year.
Bank Guarantee: Companies must secure their investment commitment with a bank guarantee. This guarantee will be cashed by the government if the company fails to meet the set criteria for domestic value addition or the minimum investment.
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