Electric cars in India: Talks of Tesla factory inconclusive, say officials

Cars being sold in India through single-brand retail trading route will have to comply with 30% local sourcing

While American electric car manufacturer Tesla may have evinced interest in entering the Indian market to sell its cars, it is yet to approach the government with a fresh offer on building a production facility in the country.

However, cars sold in India through the single-brand retail trading route will have to comply with 30 per cent local sourcing, according to the existing norms, a senior government official told Business Standard.

Tesla has reportedly contacted the government yet again to confirm its intentions on entering the Indian automobile market through the single-brand retail trading route, as reported by The Times of India on Thursday. 

However, a senior government official confirmed that the talks remained inconclusive. Discussions on setting up a factory have still not progressed beyond an initial intent for production shown by the company back in June, he added.

On the matter, Tesla Chief Executive Officer Elon Musk had tweeted back in June that the company was in discussions with the government for setting up a factory and had requested them for temporary relief on import penalties or restrictions until a local factory is built.

Tesla vehicles to come before the factory is set up?

Sources in the automobile industry said Tesla had planned to enter the market by mid-2017 and its plans were already running late.

Taking this into account, the company is keen to start selling its products in India even before a factory is built and wants to get into the market at a time when the hype of electric cars is slowly gripping the minds of consumers, the government official, mentioned above, said. 

Under such circumstances, it will have to face local sourcing norms, which even mobile manufacturer Apple had called 'stringent'. 

According to the latest consolidated Foreign Direct Investment (FDI) policy of the government, the norms say that in cases where FDI exceeds 51 per cent, sourcing of 30 per cent of the value of goods purchased will be done from India. This will have to be preferably from 'micro,  small and medium enterprises, village and cottage industries, artisans and craftsmen, in all sectors', it says.

Global companies such as Tesla may find it difficult to comply with these as the chances of high-precision components required for the making of a Tesla car is slim in India.

Under the FDI norms, the Department of Industrial Policy and Promotion (DIPP) is responsible for approving FDI proposals in the field of retail, wholesale trading of goods in the country. A senior DIPP official recently said the government will not move back from the minimum 30 per cent requirement for any company.

Electric cars to edge out others on Indian roads soon

In tune with its overarching commitments towards lowering greenhouse emissions and reducing the carbon footprint, the government has increasingly encouraged the production of electric vehicles in India. A big push in that direction is expected to unfold over the next few years with the government's target of having only electric vehicles on Indian roads by 2030.

Even Musk had earlier commented on this target by the government and his interest to be a part of it.

Several companies already operating in India, including Mahindra & Mahindra, Tata Motors, Hyundai and Maruti Suzuki have decided to get into the ring with plans to launch their own electric vehicles in the next year or two.