India may let Tesla’s Chinese vendors to make critical components in India

The Centre is open to the possibility of allowing Tesla’s foreign vendors, including those based in China, to manufacture critical components in India, according to a report in The Economic Times (ET). However, the government is unwilling to make any company-specific exemptions to its existing import and manufacturing regulations.

Some crucial components of electric vehicles (EVs), such as battery cells, are imported from China. Tesla has expressed interest in bringing its own supply chain ecosystem to India. ET quoted a source as saying the government is not planning on giving tax incentives to any one company.

India has made an exception to its foreign direct investment (FDI) rules to allow Apple to move its Chinese vendors to India. The source said that the government could provide some concessions for the import of Tesla’s critical parts.

In order to facilitate EV manufacturing in India, the Centre has implemented Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) and production-linked incentive schemes for automobiles and advanced chemistry cells.

After Tesla chief executive Elon Musk’s meeting with Prime Minister Narendra Modi in the US during his state visit in June, the Ministry of Commerce and Industry and the Ministry of Electronics and Information Technology have been holding discussions on the electric carmaker’s plans.

Tesla Inc executives have also held talks with the Centre about the company’s plans to set up battery and car manufacturing units in India. The Centre has not accepted the company’s demand for lower duties and has instead suggested Tesla makes cars locally.

The EV manufacturer had said that it wanted a 40 per cent import duty on fully assembled electric cars against the current rate of 60 per cent applicable on those vehicles priced below $40,000 and 100 per cent on those above that threshold.

The source stated that any incentive will be applicable equally to domestic and foreign investors, adding that the Centre’s approach is industry-specific and not company-specific.