By Hugo Barcia
New Delhi, Jan 21 (EFE).- The much-awaited launch of electric vehicles firm Tesla has hit a speed bump in India as talks appear to have stalemated between the government and the billionaire techpreneur Elon Musk.
“Still working through a lot of challenges with the government,” Musk, co-founder and CEO of Tesla, tweeted in reply to a question about the progress of negotiations for the company to begin selling its vehicles in India.
Musk had first expressed interest to sell in India in 2019.
While the Indian government wants Tesla to set up a factory to manufacture “Made in India” vehicles, the company first wants to test the market by selling its cars without, Soumen Mandal, an automobile expert at Mumbai-based consultancy Counterpoint Research, told EFE.
“What Indian government wants is that Tesla should assemble in India or start manufacturing, like they agreed (before) entering China (in 2019),” Mandal said.
He said the American carmaker did not want to make a large investment in one go and wanted to see first whether the Indian consumers “okayed” its products.
If the government proposal is accepted, India – the world’s sixth-largest automobile market – would become the fourth country after Canada, Germany, and China to house a Tesla factory outside of the United States.
However, Tesla’s entry has been affected by India’s import duties on vehicles, the highest in the world.
Musk had complained about that in a tweet six months ago while discussing the company’s interest in the Indian market.
Currently, the South Asian country imposes around 100 percent import duties on cars priced above $40,000, making all Tesla vehicles subject to the tariffs and making it difficult for them to compete in the Indian market.
Mandal said the government was unlikely to change the protectionist measure shortly.
He said the authorities could make an exception for Tesla if it promised to start local manufacturing within 2-5 years.
Another challenge for the firm is the lack of demand for electric vehicles, with just 310,979 such vehicles sold in 2021 in a country of over 1.35 billion people.
Although the figure amounts to a 160 percent jump compared to 2020, e-vehicles continue to represent only a tiny percentage of the Indian car market.
The president of the Society of Indian Automobile Manufacturers, Rajesh Menon, told EFE that even though the market penetration of e-vehicles was not that big, it has been “growing in recent years.”
“It is going up in all segments, especially in two-wheelers,” he said.
The expert said the government subsidy to buyers had helped sales in recent years.
Indian authorities have been offering subsidies of up to $2,000 for electric four-wheelers and up to $400 for two-wheelers.
Menon said the goods and services tax on e-vehicles was just 5 percent, compared to the 28 percent tax on other vehicles.