Elon Musk’s meeting with Prime Minister Narendra Modi as early as later this month, at a time when elections will be underway, highlights Modi's ability to attract global investments as well as the nation's growing appeal as a market.
Musk is expected to outline his investment plans for India during his visit; Tesla has been trying to enter the Indian market for several years and has been lobbying the government for tax concessions. India has, however, remained firm on its 'Make in India' stance, declining to tailor policies to favour specific companies.
India’s new electric vehicle (EV) policy offers strong incentives for global players looking to tap into one of the largest auto markets in the world. The policy gives import duty concessions to companies investing a minimum of $500 million in manufacturing units, allowing them to import up to 8,000 vehicles, costing $35,000 or more each, a year at a lower tax rate of 15%, compared to the 70-100% imposed on imported EVs.
Electric vehicles made up about 2 percent of total car sales in 2023, but the government is targeting to increase this to 30% by 2030.
ELON’S INDIA BET
It’s no secret that Musk’s silk route expedition to China seems to have faced a setback. He is struggling in a market that he helped create. Musk famously did a little happy dance at the Shanghai factory during the launch of the made-In-China Tesla model in January 2020.
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He has been questioned by US lawmakers on his proximity with Chinese leadership, who rolled out the red carpet to bring Tesla into China by way of tax credits and incentives. But even as China wooed Tesla, it announced a slew of incentives for its local automakers, which has led to Tesla’s dominance being challenged in China.
Local players like Li Auto and BYD Co. are posing stiff competition to Tesla. The company has been offering discounts to boost sales. His China investments, including the Shanghai factory plan to produce energy storage systems, are also facing pushback from Washington, as relations between Beijing and Washington sour and pressure mounts on US tech companies to look for alternatives to China.
Musk needs to find another growth market, and that’s the reason why he has been persistent with his pitch for India. India offers him a relatively untapped EV market. It is the world’s third-largest automobile market, and the Indian political leadership has stated its commitment to sustainability. “The one market where he will be saved is India,” says an executive who advises global companies on investments in India. “He is coming to India for his reasons,” he added.
WIN-WIN FOR INDIA AND MUSK
India has been working on building its manufacturing ecosystem, even as smaller nations such as Bangladesh and Vietnam have gone on to capture markets and surged ahead of India. India’s manufacturing share in the GDP as of 2022 was around 13%. It represents 28% of the country’s GDP in China.
The government intends to get people out of agriculture into manufacturing. India has several programmes, including production-linked incentive schemes launched across 14 sectors to build India’s manufacturing capabilities.
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Nearly a third of India’s manufacturing is accounted for by the auto sector. “The expectation is that Tesla will do for EVs what Maruti did to ICE (internal combustion engine) vehicles,” said a person who advises the government.
There is also a worry that the scores of jobs, especially those working in India’s BPO sector, will be at risk with the advent of AI. There is an urgent need to build an alternative ecosystem for jobs and drive the next round of growth. It’s in India’s interest to capitalize on the global disquiet towards China.
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