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Tesla eyes India plant, seeks relief

June 16, 2017 16:45 IST

Elon Musk's likely referring to waiver of 30% local sourcing norm for setting up single-brand retail

Tesla Motors is planning to set up a factory in India to cater to the local demand for electric cars, at a time when the Modi government has launched an ambitious plan of moving to 100 per cent electric mobility by 2030.

The US carmaker is looking to enter India as a retailer and is in talks with the government for waiver of restrictions on imports of its high-end electric cars until its factory is built.

“In discussions with the government of India requesting temporary relief on import penalties/restrictions until a local factory is built,” Elon Musk, chief executive officer, Tesla, said in a tweet recently.

He did not specify a time frame for the India venture.

The import penalties or restrictions that Musk referred to are most likely the norms for multinationals to set up single-brand retail in India, which mandate them to source at least 30 per cent locally.

Unlike traditional automakers, Tesla sells and services its vehicles on its own rather than through local dealers.

Even Apple has been trying to get India to waive its local sourcing norms temporarily.

While in the past the government has indicated that it might make exceptions for high-tech products (presumably iPhones and Tesla cars), there has been no clarity yet.

Because of this, India’s current laws would mandate Tesla to set up a factory and begin sourcing components locally before even selling its first car.

Last month, Musk had flagged this very issue while answering a query on Twitter about when the company would launch its business in India.

“Tesla always sells directly, but apart from asking for permission to sell directly, they might be looking for some concessions on the vehicles or the factory they want to set up. All these companies come looking for special packages,” said Abdul Majeed, partner, assurance at PwC India.

India does not restrict import of automobiles by wholesalers, but it levies a huge customs duty of 119 per cent on a CBU (completely built unit).

This was done to force global luxury automakers, which were eager to tap India’s growing base of rich individuals, to set up local manufacturing and assembly units.

Over the past couple of years, this policy has largely worked, with brands such as Mercedes-Benz, Audi, BMW, JLR and Volvo having units in India.

Experts believe that the government should do the same even for electric vehicles as it will help boost the local industry.

Alnoor Peermohamed in Bengaluru
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