Tesla, under the guidance of CEO Elon Musk, has reportedly agreed in principle to the Indian government’s proposal to not just assemble its electric vehicles in India, but also to establish a local vendor base.

What Happened? Per a Financial Express report, Tesla is not likely to postpone the creation of a domestic vendor base, as it values the integration of manufacturing and supply chains.

The move to start manufacturing in India would involve relocating these vendors to India, where they would need to collaborate with Indian firms, due to the government’s discouragement of fully Chinese investments after border clashes in 2020.

Observers note that Tesla will negotiate hard with India, as China is also currently vying to keep Musk’s investments. Musk recently met with top Chinese leaders.

The government has requested a roadmap from Tesla outlining the timeframe for establishing a local supply chain, expecting a response within three to six months.

See also: How To Buy Tesla Shares In India

Import rebates: Government officials told the visiting Tesla team that they are willing to offer import concessions on necessary components until Tesla sets up its supply chain in India.

Just as it did with Apple under the smartphone incentive scheme, the government plans to offer duty protection on components needed for domestic car assembly to Tesla. However, Tesla must locally source these components within specified timelines.

If Tesla agrees to set up a manufacturing plant and provide a timeline for achieving local production targets, the government may introduce a revised incentive scheme for electric vehicles and advanced chemistry cell batteries to attract new investments.

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