Tesla India ride faces sourcing norms hurdle

Getting car parts, competitive pricing will be other challenges, say industry experts

Tesla would be able to enter the India market only if it meets the 30 per cent local sourcing norms, till it sets up a manufacturing unit in the country. The American electric carmaker had expressed an interest to enter the market through brand sales.

“Even for brand sales, the company needs to meet local sourcing norms. Until the company establishes a manufacturing unit in India, we cannot waive off the conditions for single-brand retail,” a senior government official told Business Standard.

According to the latest consolidated foreign direct investment (FDI) policy, for more than 51 per cent FDI, 30 per cent of the value of goods purchased needs to be sourced in India. This should be preferably from micro, small and medium enterprises, village and cottage industries, artisans and craftsmen, in all sectors. 

Like Tesla, mobile handset maker Apple was keen to enter the Indian market through brand sales, and had called these norms “stringent”.

Tesla is yet to approach the government with a fresh offer on building a production facility in India. Discussions on the subject had not progressed beyond an initial intent, made by the company in June, the official added.

Elon Musk, chief executive officer, Tesla, had tweeted in June the company was discussing, with the government, the prospect of setting up a factory, and had requested it for temporary relief on import penalties or restrictions until a factory was built. 

Local norms, however, are not the only hurdles Tesla faces.

Sources in the automobile industry said Tesla had planned to enter the market by the mid-2017, but was running late. 

The company was keen to sell its cars even before a factory was built, especially as the government was encouraging local carmakers to manufacture e-vehicles. A maker of premium e-cars, Tesla would find it difficult to source parts in India, where the ecosystem for the e-vehicles was still quite nascent. 

An industry official said pricing its products competitively would also be a challenge for Tesla, especially as it has to pay import duties and take care of logistics in the country. An entry segment Tesla vehicle in the US was prices at $35,000

Indian auto majors such as Mahindra & Mahindra have already launched electric models like eVerito and e20 Plus, but are struggling to expand sales. The lack of charging infrastructure was a major inhibition for buyers.

The government, however, aims to have only electric vehicles on the roads by 2030.