Tuesday, Aug 09, 2022
Outlook.com

Why Elon Musk Is Unlikely To Pay Heed To Adar Poonawala's Request

With Musk adamant that import duties be slashed by 100%, and the government insisting this reduction won't be forthcoming unless Tesla sets up a local factory, the brand's entry into India seems remote for now

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Elon Musk AP

Ever since his high-voltage acquisition of Twitter in April for $44 billion, every tweet by Elon Musk gets more than its fair share of attention. When he recalled his 2007 visit to the Taj Mahal this week, calling it "a wonder of the world." Paytm's founder and CEO Vijay Shekhar Sharma quickly invited him to deliver the first Tesla car at the Taj, saying it would be an incredible challenge for the company to build Full Self Driving (FSD) vehicles for India. "We are known to be the most-unruly road users️. That said, when are you coming here to deliver first @Tesla here at The Taj?" Sharma asked Musk.

Moreover, many a Twitterati have been unabashed when it comes to recommending businesses that the world's richest man should take up next. This Sunday, Serum Institute's CEO Adar Poonawalla invited Musk to invest in India in his tweet. "Hey @elonmusk just in case you don't end up buying @Twitter, do look at investing some of that capital in INDIA for high-quality large-scale manufacturing of @Tesla cars. I assure you this will be the best investment you'll ever make," Poonawalla tweeted.

ROLLING OUT THE RED CARPET

This would not be the first invitation Musk received to invest in India, and it is unlikely to be the last. Not too long ago, Union Minister for Road Transport and Highways Nitin Gadkari too stated that the billionaire is welcome to manufacture e-vehicles in India. However, he cautioned that it could not be a "good proposition" if the Tesla owner desires to build in China and sell in India.

"It is a very easy alternative; if Elon Musk is ready to manufacture a Tesla in India, there is no problem. We have got all competencies; the vendors are available. We have got all types of technology, and because of that, he can reduce the cost," Gadkari noted.

Earlier this year, Musk claimed that Tesla was facing many challenges with the central government. Politicians from Telangana, Punjab, West Bengal, etc., quickly took to Twitter to invite the e-vehicle major to set up shop in their respective provinces. This came amid the impasse between Tesla and the government over import duties that have prevented the US carmaker from selling its cars in India, years after showing a serious inclination to tap the world's largest democracy.

While Prime Minister Narendra Modi's administration wants Tesla to set up a factory to sell locally and export, Musk has insisted on slashing import duties by as much as 100% so that Tesla can first establish a market. Last August, he said that the company might set up a manufacturing unit in India if it first succeeds with imported vehicles in the country.

IMPORT DUTIES SLAM THE BRAKES ON

After displaying initial interest in India, the entrepreneur reached an agreement with China to set up its factory in Shanghai in 2017. Tesla rolled out its first China-made Model 3 sedan in 2020. Musk argued that India lacked the ecosystem to support its EV sales in India.

"Still working through many challenges with the government," he said in a Twitter post early this year. Musk opined that a 'temporary tariff relief for electric vehicles would encourage Tesla and other global carmakers to make inroads in India.

Tesla first wants to sell completely built units of its electric vehicles in India before it can take a call on local production. The company had registered an Indian arm, Tesla Motors India and Energy, in Bengaluru in January 2021.

The Central government, however, made it clear that there would be no import duty reduction or other benefits if Tesla did not set up a local factory. While Musk had said that Tesla wanted to launch its vehicles in India, he also noted that "import duties are the highest in the world by far of any large country!" India levies 60% import duty on EVs costing $40,000 or less and 100% for those priced below.

The cheapest car from Tesla – The Model 3 Long Range – is priced at $45,490. Its other models cost as much as $98,940. This puts all Tesla cars within the 100% import duty bracket, which in turn would make pump up their on-road cost in India.

There would be few takers for such premium cars, especially at a time when the EV market is getting more competitive by each day, with models from other carmakers coming with more lucrative price tags. Currently, petrol and diesel cars dominate the automobile market, and EVs comprise less than 1% of the entire sector.

However, with a growing number of economically viable alternatives entering the market, people are gradually opting for EVs. Today, EVs are available from Rs 13 lakh upwards in India, and consumers can get a feature-packed premium car from MG, Audi, and other brands for much lesser than what they would have to shell out for an imported Tesla car.

The Indian government has suggested that Tesla consider importing partially built vehicles, which attract a lower import levy, instead of fully built cars. According to media reports, in the backdrop of this stalemate, Tesla has reportedly started working for the larger Asia-Pacific instead of the Indian market.

Indian buyers keen to flaunt their Tesla will have to bide their time till either of the two parties hits the middle ground.

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