Nitin Gadkari’s plan to turn India into EV power hub gets a break after Elon Musk puts India entry plan on hold

Gadkari recently had said, "If Elon Musk is ready to manufacture in India, then there is no problem. Come to India, start manufacturing, India is a large market, they can export from India"

Sanjay JogUpdated: Friday, May 13, 2022, 11:33 PM IST
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Union Minister Nitin Gadkari | File Image

Mumbai: Union minister Nitin Gadkari’s ambitious plan to turn India into an EV power hub received a blow on Friday after the Elon Musk-owned Tesla put on hold its plans to sell electric cars in India, abandoned its search for showroom space and reassigned some of its domestic team after failing to secure lower import taxes.

The decision is an outcome of more than a year of deadlocked talks with government representatives as Tesla sought to first test the Indian market by selling electric vehicles imported from production hubs in the United States and China, at lower tariffs. But the Indian government wanted Tesla to commit to manufacturing locally before it lowers the tariffs, which can be as high as 100% on imported vehicles.

Tesla had set itself a deadline of February 1 but the gridlock persisted despite hectic lobbying.

Gadkari had announced that the government was aiming for 30 per cent electric vehicle sales penetration in private cars, about 70 per cent for commercial vehicles and 80 per cent for two and three-wheelers by 2030.

Gadkari had also said that should the adoption of EVs in two-wheelers and car segment surge by 40 per cent and if almost 100 per cent of the buses were electric by 2030, it would help India reduce its consumption of crude oil by 156 million tonnes or save Rs 3.5 lakh crore.

Industry experts said had Musk agreed to manufacture EVs in India, instead of importing them from China, it would have helped EV prices drop in the next two years.

Gadkari recently said, “If Elon Musk is ready to manufacture in India, then there is no problem. Come to India, start manufacturing, India is a large market, they can export from India.”

Earlier, the heavy industries ministry had also asked Tesla to first start manufacturing its iconic electric vehicles in India before any tax concessions could be considered. Currently, cars imported as Completely Built Units (CBUs) attract customs duty ranging from 60-100 per cent, depending on the engine size and cost, insurance and freight (CIF) values less or above $40,000.

On its part, Tesla had said last year in its communication to the Union road ministry that the effective import tariff of 110 per cent on vehicles with customs value above $40,000 for zero-emission vehicles is ‘prohibitive’. The US firm had urged the Centre to standardise the tariff on electric cars to 40 per cent, irrespective of the customs value and withdraw the social welfare surcharge of 10 per cent on electric cars.

Tesla had argued that these changes would boost the development of the Indian EV ecosystem and the company would make significant direct investments in sales, service and charging infrastructure; and significantly increase procurement from India for its global operations.

The company had argued that these proposals would not have any negative impact on the Indian automotive market, as no Indian original equipment manufacturer currently produces a car (EV or Internal Combustion Engine) with an ex-factory price above $40,000 (around Rs 30.6 lakh), and only 1-2 per cent of cars sold in India (EV or ICE) have ex-factory/customs value above $40,000.

Meanwhile, Tesla had been exploring options to open showrooms and service centres in New Delhi, Mumbai and Bengaluru but that plan too is on hold now.

The Shiv Sena-led Maha Vikas Aghadi government was quite optimistic about Tesla’s plan to set up showrooms and service centres in Maharashtra. State Environment and Tourism Minister Aaditya Thackeray, Industry Minister Subhash Desai and Maharashtra Industrial Development Corporation CEO P Anbalagan had held a series of meetings with Tesla representatives and offered land parcels and other fiscal incentives.

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