Tesla's plan to build a factory in India has been stalled for some time, but the Indian side has not given up its pursuit of Tesla CEO Elon Musk.
Last month, after Indian Prime Minister Modi won the election, Modi and Musk continued to exchange information on social media. The Indian side is also paying attention to whether Tesla will register relevant import tariff preferential policy plans in India.
However, two people familiar with the situation said that since Musk suddenly cancelled his visit to India in April this year, local Indian officials have not discussed the above-mentioned tariff issues with Tesla.
We believe Tesla will build a factory in India, but this won't happen until 2026, "said Dan Ives, a long-term Tesla bull and analyst at Wedbush Securities, in an interview with First Financial News
Still committed to building factories in India
Looking forward to meeting with Indian Prime Minister Modi! "Musk posted on his social media platform in April.
According to two people familiar with the plan, during this trip, Musk not only had to choose a location for Tesla's upcoming $3 billion electric car factory in India, but also arranged a family vacation: Musk's mother, his three children, and others would also come together.
It is worth noting that Rohan Patel, Tesla's global policy and business development director, previously served as an energy advisor to former US President Obama. He led Tesla's expansion efforts in India and hired about a dozen people to negotiate with Indian officials. The negotiations between India and Tesla will accelerate from 2022 onwards.
People familiar with Tesla's India plan say that Tesla plans to invest $2 billion to $3 billion over three years, with a target annual production capacity of 500000 vehicles for the proposed factory, most of which will be used for exports. Tesla also discussed investing in building its own battery factory. Subsequently, negotiations between the two sides accelerated after India announced plans to lower tariffs on higher priced imported electric vehicles. Around the same time, the company began producing right-hand drive cars at a factory near Berlin, preparing to export them to India.
However, Musk canceled his trip to India 10 days before the scheduled visit. Unfortunately, Tesla's mission is very heavy and the visit to India has to be postponed, but I am very much looking forward to the visit later this year, "Musk said at the time
It is reported that the Indian side has prepared about 20 visas for the delegation in April, but they can only wait.
Subsequently, Musk's lightning visit to China yielded fruitful results. On April 29th, after Musk's visit to China, Tesla's US stock price jumped 13% in pre-market trading, closing at $194.4 per share, with a daily market value increase of $82.1 billion (about 600 billion yuan), sweeping away the decline caused by layoffs and poor sales.
However, according to insiders, in the long run, Tesla is still committed to building factories in India. The person stated that Musk is obsessed with India's potential as a market and manufacturing center for automobile exports.
Musk hopes to be everywhere, that's how he operates, so he needs both China and India, "said a person close to Tesla's India plan." Although Musk's cancellation of the trip may hurt some people's self-esteem, as a country, India still needs Tesla to prove that it is a great country investing in electric vehicles
Indian officials have also expressed confidence that Tesla has not lost interest in the Indian market. An official said, "People generally believe that they will come sooner or later
At present, the electric vehicle market in India is small in size but growing significantly. In 2023, the sales of passenger cars in India will increase by 10% year-on-year, and the sales of electric vehicles will almost double, accounting for 2% of the total passenger car sales. The Indian government's goal is to increase this proportion to 30% by 2030. Tata Motors holds over two-thirds of the Indian electric vehicle market share, followed by Mahindra and BYD.
Do Indian policies have advantages
Currently, Indian officials are closely monitoring Tesla's next actions in India, including whether to register for a tariff preference program.
As early as 2016, Musk had plans to allow Tesla to enter the Indian market, but he couldn't avoid the high tariffs in India.
In 2021, Musk once again stated on social media that Tesla hopes to enter India to build factories, but the prerequisite is that the Indian government can reduce import tariffs so that Tesla can sell in India.
A few weeks before Musk's scheduled visit to India, the Indian government announced a new electric vehicle policy. According to this policy, if manufacturers can invest over $500 million in India within three years and build factories domestically, they can enjoy a lower tax rate of 15% when importing electric vehicles priced at $35000 or more. Previously, India imposed tariffs of up to 100% on imported electric vehicles based on their prices.
At the same time, Indian policy makers have also initiated a consultation process to release policy guidelines for electric vehicles. There are even reports that Maharashtra and Gujarat states in India will provide Tesla with land for building factories.
In fact, as early as April 2015, India proposed the "National Electric Mobility Plan" (FAME) to promote the development of new energy vehicle technology, build pilot projects, and construct supporting infrastructure such as charging piles. In the following years, India has been actively implementing policies related to electric vehicles. In recent years, establishing a vibrant electric vehicle ecosystem to reduce dependence on imported crude oil has also been one of the main goals of the Indian government.
Ives predicted to First Financial reporters, "Indonesia and Malaysia may lead India in Tesla's expansion. Tax incentives and logistics will be key to the success of the Indian market
However, it should be noted that any expansion of Tesla in India will face significant risks as global electric vehicle sales slow down.
Automakers from Ford, General Motors to Toyota are struggling in crowded markets. Tesla itself is also experiencing turbulence, significant layoffs, and shifting its strategic focus towards autonomous driving and artificial intelligence.
Ives believes that with weak demand, the entire electric vehicle industry will have a tough time in the price war. "There will be winners and losers, and the surviving car companies will get through this ordeal. The electric vehicle industry will experience growth, but we will go through a painful digestion period
Moreover, scaling up electric vehicle factories and building supply chains are very difficult. Companies such as Rivian, Lucid, Fisker, and many startups face these challenges He said that electric vehicles are a survival of the fittest industry.
At present, any additional sales are crucial for Tesla in the short term, as Tesla is facing a decline in delivery volume as its best-selling Model Y and Model 3 cars approach saturation in the US market.
As of press time, on July 12th, Tesla fell another 3% in pre-market trading on the US stock market, and closed down 8.44% the previous trading day.
In a previous interview, Ives told reporters that Tesla's long-term valuation depends on "fully autonomous driving (FSD)" and autonomous driving.