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Tesla Gets An Invite To Set Up Factory In Tamil Nadu, India

*This article was originally published in CleanTechnica

Tamil Nadu’s Chief Minister, Edappadi K. Palaniswami, is on an investment tour in the US and the UK. In the US, he stopped by the Tesla plant in San Francisco. According to Times of India, a press release stated that “The CM visited Tesla Inc unit in Fremont and got to see the manufacturing of environment-friendly vehicles, batteries, and energy storage products.”

There have been quite a few requests from Twitter users to Elon Musk to bring Tesla to India. One of the most vocal of the voices is the founder of Tesla Club India, Nikhil Chaudhary Birbhan. So is Arun Bhat, a Tesla Model 3 reservation holder since April 2016 and a member of the club. Tesla India Club is an online unofficial club based in India that supports Tesla and wants to see India embrace Tesla and its mission.

Nikhil is a student at Delhi University and wrote Elon Musk an open letter about Tesla’s possible future in India. In the letter, he points out that India has some of the most polluted cities in the world and reminds us of Tesla’s mission to accelerate the world’s transition to clean sustainable energy.

In the letter, Nikhil makes a suggestion that perhaps Tesla should start with solar and grid-sized batteries before electric vehicles in India. He points out that the solar industry in India is booming and India aims to have 80 GW of solar power capacity by 2020. Later on, maybe a Gigafactory that can produce both solar panels and electric vehicles would be logical in the country.

Tesla initially opened up its reservation page for Model 3, its most affordable electric car to date, for Indian buyers on April 1, 2016. But initial teething problems and import duty structure have prevented Tesla from making the car available for purchase even to reservation holders. 

Elon also said in the Tesla shareholder meeting that he would be surprised if they won’t be there by next year. He has also explained why Tesla may not come to India soon and it’s due to import fees. “For other countries, we pay in part for the local factory by selling cars there ahead of time. Also, gives a sense of demand. Current rules in India prevent that, but recent changes in sales tax give hope for future changes.”

Perhaps this visit from Chief Minister Palaniswami will help change that. On his tour, he learned about the Tesla Supercharger Network and ways to help prevent pollution caused by gas and diesel cars in the state. He also went to the Tesla factory in Fremont and, according to DTNEXT, sources have confirmed that his visit to Tesla was part of his initial itinerary since he has been keen on inviting Tesla to his state. He gave a presentation about the facilities for investing in the state’s automobile sector and incentives that the state would offer.

Tamil Nadu yesterday unveiled its EV policy and, according to NDTV, the draft policy proposes 100% exemption on the electricity tax until December 31, 2025, for EV charging infrastructure and EV-related manufacturing industries in the state. The EV-related industries will also receive benefits to obtain land by sale or lease with a 100% exemption on stamp duty for transactions till December 31, 2022. The Tamil Nadu EV Policy also proposes a higher capital subsidy of 20% on investments of over 20 years for EV battery manufacturing. The units are also eligible for a 20% and 50% land subsidy in southern districts of the state. The special package will be applicable for investments made by December 31, 2025.

According to The Economic Times, India has emerged as one of the world’s most polluted countries, with particulate matter levels spiking over 500 micrograms per cubic meter in Delhi alone. They even have something called “smog season.” The Economic Times cites data from a report by the State of Global Air (2019) which reflects that over 1.2 million people died in India due to air pollution in 2017. This is devastating.

Young people like Nikhil see Tesla as a ray of hope beaming through the smog, and hope that one day the smog will dissipate and the air will be clean again. He hopes that the air he breathes will not take his life someday. Nikhil is definitely one of the millions hoping that Tesla will establish a plant in India.

Nikhil’s Take

Nikhil provided some extra commentary on the matter for CleanTechnica. It is below (with some editing).

First, to clarify, Tesla Club India is an online community that is not officially tied to Tesla in any way. 

Since my last open letter to Elon in January, many things have changed in favor of EVs. Sadly, import duties aren’t one of them. 

  1. The government of India has decreased GST on EVs to 5% from 12%.

  2. GST on EV chargers has been reduced to 5% from 18%.

  3. Tax benefits up to 1.5 lakh a year, max up to 2.5 lakh in total, on the interest of loans taken for EVs.

  4. The State Bank of India reduced the Green Car loan interest rate by 20 basis point.

  5. A few states have removed the road tax on EVs (which can go as high as 20% depending on state and vehicle). Hopefully, all states will do it. More states will soon release their EV policies.

  6. The government is securing lithium supply. Also, the government of India will soon be taking bids on a battery factory with a total of 40 GWh of production capacity. There was a report by LiveMint that Tesla has shown interest in this. I don’t know if it’s true, but would recommend Tesla to take part in it. There would be incentives by the government to establish that factory.

  7. The FDI rule of 30% local sourcing is now relaxed. Also, single-brand retailers can sell online before setting up brick and mortar stores.

Now, there is a question of demand. The Indian luxury car market is near 60,000 vehicles per year, which isn’t much compared to North America, China, or Europe. So, importing as CBU isn’t going to do any good — as Elon stated, it would make the Tesla Model 3 unaffordable. What might help is a small assembly plant.

The Tamil Nadu Chief Minister has invited Tesla, so maybe Tesla should get talking to prop up a small assembly plant. Nitin Gadkari, Minister for Road Transport & Highways of India and Shipping Ministry of Micro, Small and Medium Enterprises in the Government of India, earlier said (in 2017) that he offered free land and incentives for a factory. So, now, Tesla should definitely get in talks with the government. 

Import of electrically operated vehicles as knocked down kits with disassembled battery packs, motors, motor controllers, chargers, power control units, energy monitor contractors, brake systems, and electric compressors not mounted on chassis will attract a 10% duty, while those with pre-assembled battery packs, motors, motor controllers, chargers, power control units, energy monitor contractors, brake systems, and electric compressors not mounted on a chassis or a body assembly will attract a 15% duty. That may make all the difference between a Tesla being an aspirational buy for the Indian upper middle class to something only a few millionaires can afford. A locally assembled Model 3 base variant will be around 25–30 lakh if assembled as a CKD vs 50+ lakh if imported as a CBU. 

I don’t see the Indian government reducing import duties anytime soon, as it is encouraging the Made-in-India initiative unless some magic happens. However, according to an article recently published in the New Indian Express, India may offer import duty cuts to the US on high-end automobiles. The Prime Minister will be visiting the US next week and could discuss this.

Recently, the government gave a breather to gas/diesel vehicle companies amid a slowdown in the auto sector by not having any official deadline for EVs (which was 100% EV sale by 2030, then reduced to 30% EV sale by 2030). But the government still recognizes the need for cleaner vehicles, and steps are being taken by the central government as well as state governments. Public electric vehicle charging infrastructure is emerging slowly. The government also plans to have a number of highways as an electric corridor by March 2020. 

Current offerings by Tesla can’t be mass market in India. However, Model 3 Standard Range/Standard Range+ vehicles and the Model Y Standard Range/Standard Range+ can grab significant market here if assembled or produced locally. India is cost-conscious. People look at the value proposition (i.e., what will be the cost of ownership), and the craze for Tesla is already high in youngsters (like me). Hopefully, Tesla will be introducing a $20,000–25,000 model in the next few years, as Elon mentioned earlier in an interview given to MKBHD, the famous YouTube tech reviewer.

Solar as mentioned above is a booming sector. Energy storage is increasing also. Tesla should start solar in India, and should provide a Powerwall of a 5–6 kWh size, which would be ideal for Indian requirements.

Arun is eagerly waiting for his Model 3. And I too aim to have a Tesla one day.

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