5 mins read . 17 May 2023
The journey of Tesla in India has been bumpy. They set up a company for India operations, but the government was unwilling to meet most of their demands. Even as Tesla put its India plans in cold storage, the recent speed at which Apple has moved in its India foray is a clarion call to Tesla to be quick about its India plans. Now, senior representatives from Tesla Inc are set to visit India to hold talks with government officials to establish their automobile operations in the country.
Like Apple, even for Tesla it is a case of looking beyond China. Tesla is looking to deepen its supply chain in India and push to diversify beyond China. This is part of the American China-Plus-One policy; which most US companies have now adopted. In these upcoming meetings in India, Tesla executives will discuss the local sourcing of components for Tesla models. This could be crucial considering Tesla has not yet managed to begin its operations in India.
While every other car manufacturer has set up operations in India, Tesla has often found it a herculean task. The Modi government has possibly pivoted India’s growth story with an inward looking “Atma Nirbhar Bharat” campaign. In this strategy, reliance on foreign imports is reduced, and the power of local talent is harnessed. India has been lukewarm to Tesla. India has refused to allow Tesla to sell vehicles assembled in China in the Indian market. On the other hand, Elon Musk made his reservations about the India ecosystem very vocal, when he tweeted about India’s colossal import duties, and its treatment of clean energy vehicles on the same wavelength as diesel or petrol.
Elon Musk is known for his very brusque style and aggressive approach. That is unlikely to work in the Indian context. Ideally, Elon Musk should take a leaf from the playbook of Apple Inc. For starters, Apple may have been a late starter in India, but it is moving at a frenetic pace. It is rapidly diversifying its supply chain beyond China to Vietnam and India.
Apple managed to overturn its production paradigm for India to a large extent by bringing electronic devices in CKD (Completely Knocked Down) form. That means; you bring in these CKD kits at zero import duties, assemble them in India and then sell them. Apple has also made the best of the government sponsored Production Linked Incentive (PLI) scheme, which incentivizes companies operating in India for the quantum of production of identified products.
Elon Musk has a demand charter for India, most of which is unlikely to be accepted. Musk refuses to set up plants in places where they are not allowed to first sell and service their vehicles. India will not accept Tesla selling China assembled vehicles in India. Tesla wants the Indian government to roll out the red carpet, but the government is unwilling to go beyond the structured incentives like PLI.
One thing is clear from the Apple story; India is too important to delay the foray. Tesla certainly realizes the importance of pivoting production beyond China, but wants it done on his own terms. That may be too much to expect, but the good news is that both Tesla and the Indian government are keen to shake hands and move ahead.
Content Source: Financial Express