Tesla's $2B India Investment Plan Hinges On A Key Condition: Here's Why The Government's Taking Its Time

Tesla’s big bet on India comes with a clear ask: a concessional import duty of 15% for its electric vehicles during the first two years of operation. The US electric carmaker’s ambitious plan hinges on the Indian government’s green light for this lowered tariff.

Here’s the deal: According to an Economic Times report, Tesla’s willing to pump in a staggering $2 billion for a local factory, but it’s linked to how many cars it can bring in at this reduced duty. The proposal? If the government nods to a concessional tariff for 12,000 vehicles, Tesla is ready to invest $500 million. But if it’s for 30,000 vehicles, the investment could balloon to $2 billion.

The Indian government, however, is playing it cautiously. It is considering reducing the number of cars allowed under this special tariff, potentially capping them at 10% of the total EVs expected to sell in India this fiscal year (around 10,000 units), with a 20% increase in the second year.

See also: Why Siemens’ Shares Are Gaining Today Despite ₹24 Cr Tax Demand

Why are things ticking slowly? Tesla’s proposal, which also includes a commitment to localize up to 20% of the value of made-in-India cars in two years, is under scrutiny by multiple ministries, guided by the Prime Minister’s Office.

As it stands, India imposes a hefty 100% import duty on cars over $40,000 and 70% for cheaper ones. The government might ask for a bank guarantee linked to Tesla’s capital commitment as a safety net, although Tesla is pushing back on this requirement.

Tesla plans to kickstart its India journey with three models: the Model 3, Model Y, and a new hatchback, eyeing a significant rise in auto parts sourcing from India. Amidst industry concerns, the government assures that any incentives for EV production will be uniform for both foreign and domestic players, emphasizing an industry-wide rather than a company-specific approach.

Read next: Apple’s iPhone Exports From India Skyrocket, Surpassing $5B In Just 7 Months

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