MC Exclusive: Tesla likely to import completely built up EVs from German facility to India

Tesla is looking to multiply on volumes and India, being the number three volume player in the world, provides the perfect platform for it.

Even though Tesla Inc. is yet to firm up a timeline for its India foray, the American multinational automotive and clean energy firm will begin its first phase here with direct imports from its German Gigafactory.  Well-informed sources told Moneycontrol that the Elon Musk-led company has been dissuaded by Indian government officials to import any car from its Shanghai gigafactory in China.

“Due to geopolitical tensions between India and China, the top management at Tesla has been categorically told by the ministries not to import any car from the world’s largest EV market. Moreover, Indo-German ties on multiple disciplines have been inked earlier and the US EV maker is encouraged to leverage the same,” a source working in an advisory capacity with the company told Moneycontrol on condition of anonymity.

Tesla Inc has invested  €5 billion to set up a gigafactory at Brandenburg in Germany, which incidentally is its first facility in Europe. The US-based EV maker rolls out the Model Y Crossover from that plant, which will see a further capacity expansion of 1 million units per annum. Latest media reports suggest that the company is planning to roll out a €25,000 car (Rs 20 Lakh+), which will also be launched in the Indian market.

Another source, who also didn’t wish to be named, told Moneycontrol that Tesla is seeking a customs duty cut on import of electric vehicles - Completely Built Up (CBU) from Germany, the source added that the government doesn’t seem too averse to the idea since several luxury carmakers, such as, Mercedes, BMW, Audi etc., are based out of Germany.

“Tesla was seeking concessions on the import of electric cars from other countries. So models brought in as Completely Built Up (CBU) from Germany can be slashed by 20-30 percent which will be a boon not only for Tesla, but other luxury carmakers based there, such as Mercedes, BMW, Audi, etc.,” said the source.

However, CNBC-TV18 reported citing sources that claims of government mulling customs duty concession for Tesla are speculative, and no decision has been taken in this regard.

At present, India imposes a 100 percent customs tax on imported cars (of all powertrains) with Cost, Insurance and Freight (CIF) value exceeding US$ 40,000. For vehicles with CIF below $ 40,000,  buyers are charged 60 percent import duty.

As per Investopedia, Cost, Insurance and Freight (CIF) is an international shipping agreement which represents the charges paid by a seller to cover the costs, insurance, and freight of a buyer's order while the cargo is in transit.

An emailed questionnaire sent by Moneycontrol to Tesla’s global spokesperson twice remained unanswered till the time this article was published.

“While Tesla has earmarked its German facility for its most affordable car, it expects sizable volumes of this model from the Indian market. The unnamed Rs 20 lakh car, will initially follow the Completely Knocked Down (CKD) route with kits being imported from Germany and will later be heavily indigenised in India,” one of the sources quoted above told Moneycontrol.

“Also, luxury electric SUVs are gaining a lot of traction in Europe and India. So, it will be more prudent to launch Model Y in India in the initial phase than the Model 3 sedan which is made in the US and China." another source revealed.

It was already reported earlier that Tesla Inc is planning to source automobile components worth $1.7-1.9 billion during this calender year, Union Commerce Minister Piyush Goyal said at an ACMA conclave. He had also indicated that the quantum of auto component imports will be nearly doubled from $1 billion worth of parts sourced in 2022.

Puneet Gupta, Director (India & ASEAN Automotive Sales Forecast), S&P Global Mobility is of the firm view that Tesla’s entry into India will be win-win both for India and the company.

“Tesla is looking to multiply on volumes and India, being the number three volume player in the world, provides the perfect platform for Tesla. India Is aggressively eyeing greener cars and once electric cars come into India with world class technology, it will be the beginning of the end of hybrids in India too. “

He went on to add, “Once consumers get first-hand experience of world class EV technology, the inclination towards electric vehicles will go up drastically.”

Avik Chattopadhyay, an auto industry veteran and Co-Founder of  brand strategy and solutions practice,  Expereal, feels that making a Tesla in India will not be as mind-bending and earth-shattering as it is being made out to be, similar to iPhones being made here.

“Mobility in India will not become electrified overnight. These are optics and good for PPTs that we make a Tesla in India. Even at $30k, we are talking about an electric car beyond Rs.20 lakhs, so do not expect any more than 2,,00,000 to sell in a year, at the optimistic best. The fact that we keep obsessing with a Tesla coming to India while Vietnam takes pride in a Vinfast being sold in Tesla's home country is a sign of an inferiority complex and sheer lack of confidence we suffer from, as a country," said Chattopadhyay.