Tesla, Inc. (NASDAQ: TSLA), the renowned electric vehicle company led by CEO Elon Musk, has reportedly reached a preliminary agreement with the Indian government. The agreement entails not only assembling Tesla’s electric vehicles in India but also establishing a local vendor base, according to reliable sources.
Following this news, Tesla’s shares (TSLA) experienced a significant increase of 1.70%, reflecting investor enthusiasm about the company’s expansion plans in India.
What Happened?
Tesla remains committed to building a domestic vendor base in India. The company recognizes the value of integrating manufacturing and supply chains and aims to avoid any potential delays, as highlighted in a report by India’s Financial Express newspaper.
To facilitate the manufacturing process in India, Tesla would need to relocate its existing vendors to the country. These vendors would then collaborate with Indian firms, as the Indian government discourages substantial investments from China after border clashes between the two nations in 2020.
Industry observers expect tough negotiations between Tesla and the Indian government, given China’s ongoing efforts to retain Elon Musk’s investments. Recently, Musk held meetings with top Chinese leaders, indicating the keen competition between the two countries.
In response to Tesla’s proposal, the Indian government has requested a roadmap outlining the timeline for establishing a local supply chain. Officials anticipate receiving a response from Tesla within three to six months.
Import rebates
During discussions with the Tesla team, Indian officials expressed their willingness to offer import concessions on essential components until Tesla successfully sets up its supply chain within India.
Drawing inspiration from a successful incentive scheme with Apple under the smartphone segment, the government plans to extend duty protection on components required for domestic car assembly to Tesla. However, Tesla must adhere to specified timelines for sourcing these components locally.
If Tesla agrees to establish a manufacturing plant in India and provides a clear timeline for achieving local production targets, the Indian government may introduce a revised incentive scheme. This scheme aims to attract new investments by offering incentives specifically tailored to electric vehicles and advanced chemistry cell batteries.
