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Tesla's 2 Billion Dollar India Deal Depends on a 15 Percent Import Duty Breakthrough

Tesla's $2 Billion Vision, Factory in India Awaits Green Light with a 15% Import Duty Twist

24 November 2023

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Kunal Tyagi

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  • Tesla considers investing up to $2 billion in India, contingent on a government agreement to reduce import duties to 15% for the first two years.

  • The proposal includes a tiered investment approach, with $500 million for 12,000 vehicles and $2 billion for 30,000 vehicles, pending government approval.

  • Indian government departments, including the Ministry of Heavy Industries and Ministry of Finance, are currently evaluating Tesla's proposal, with an official announcement expected in January

In a significant development, Elon Musk's Tesla is considering a substantial investment in India, contingent upon the government's willingness to reduce import duties on its vehicles. According to a report by The Economic Times, Tesla is prepared to invest up to $2 billion in establishing a factory in India if the government agrees to cut import duties to 15% for the first two years of operations. This move aligns with India's efforts to revamp its electric vehicle (EV) policy by slashing import taxes, potentially down to 15%, from the current rates of 100% for cars priced above $40,000 and 70% for others.


Tesla's proposal outlines a tiered investment strategy, with up to $500 million earmarked if the reduced duty applies to 12,000 vehicles and a substantial $2 billion if the concession is extended to cover 30,000 vehicles. The government is reportedly evaluating the viability of Tesla's proposal, expressing interest in reducing the number of cars imported at the lower duty, as reported by The Economic Times.


The Department for Promotion of Industry and Internal Trade, Ministry of Heavy Industries, Ministry of Road Transport & Highways, and the Ministry of Finance are currently examining Tesla's proposal. However, there has been no official response from Tesla or the concerned government departments at the time of reporting.


This potential investment is part of Tesla's broader plan to expand its operations in India, with the electric carmaker eyeing the introduction of the Model 3, Model Y, and a new hatchback in the country. The proposal is currently under scrutiny by various government departments, and an official announcement is anticipated in January. This development marks a crucial step in Tesla's journey into the Indian market and could significantly impact the electric vehicle landscape in the country.


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Tesla's engagement with India has witnessed both challenges and progress. While Tesla's CEO, Elon Musk, has expressed a keen interest in making a "significant investment" in India, the company faced hurdles related to high import taxes and specific EV policies. However, recent visits and discussions, including Commerce Minister Piyush Goyal's visit to Tesla's plant in Fremont, indicate a positive trajectory, with Tesla aiming to double its purchases of auto parts from India to $1.9 billion in the current year.


As the Indian government navigates the delicate balance between promoting local manufacturing and attracting foreign investment, Tesla's potential investment could mark a pivotal moment in shaping the future of electric mobility in the country. The outcome of these negotiations will likely have far-reaching implications, not only for Tesla but for the broader EV industry in India.


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