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Tesla held talks with India on auto incentives, battery making -source

Published 05/18/2023, 02:25 AM
Updated 05/18/2023, 08:36 AM
© Reuters. FILE PHOTO: The Tesla logo is seen on a car in Los Angeles, California, U.S., July 9, 2020. REUTERS/Lucy Nicholson

By Aditi Shah, Aditya Kalra and Munsif Vengattil

NEW DELHI (Reuters) -Tesla Inc has held discussions with officials about incentives being offered by India for car and battery manufacturing, said a person with direct knowledge of the talks, as the automaker looks anew at entering the Indian market.

The U.S. electric car maker has proposed setting up a factory in India to build electric vehicles (EVs), Reuters reported on Wednesday. Plans to locally manufacture EV batteries are also being discussed, said the person with direct knowledge.

Tesla (NASDAQ:TSLA) is "still testing the waters and trying to understand the local policies," said the person, who declined to be named as the talks were private.

During the visit, details of which have not been publicly disclosed by the company or any Indian ministry, Tesla on Thursday met India's deputy IT minister Rajeev Chandrasekhar, one of the highest-ranking officials the company held talks with, said a source in the Indian government.

Tesla and India's IT ministry did not immediately respond to an emailed request for comment.

Tesla's delegation included Karn Budhiraj, a senior supply chain executive based in the United States, the two sources said.

The discussions in India represent a shift in stance for the U.S. electric car maker.

Late last year it was focused on seeking lower import taxes on cars, which can be as much as 100%, and talks with the Indian government became deadlocked. India is keen for Tesla to build vehicles locally but the company argued it wanted to export first so that it could test the strength of demand.

Recent talks have touched on India's taxes on imported cars but have mainly centred on how Tesla could make use of a government scheme, the first source said.

India has set aside around $6 billion under two programs to boost EV sales and manufacturing. Under the schemes, automakers and battery manufacturers can get certain cashback incentives for selling and exporting locally made vehicles and parts.

"It appears Tesla has come with a different heart and head this time to take advantage of the auto boom (in India) ... Tesla can negotiate on things like taxes better if it first sets up a plant," said Mohan Shukla of New Delhi-based public policy advisory White Dolphin Media.

Tesla has described a goal of selling 20 million EVs a year in 2030, a level that would require massive new investment in assembly plants and battery production.

Outside the United States, Tesla has a plant in Shanghai - its largest factory worldwide - and one in Brandenburg, Germany.

In addition to India, Tesla has been in talks over the past year with officials in Indonesia and South Korea about potential investments.

© Reuters. FILE PHOTO: Visitors check a Tesla Model 3 car at a showroom of the U.S. electric vehicle (EV) maker in Beijing, China February 4, 2023. REUTERS/Florence Lo

India is the world's third-largest automobile market. Prime Minister Narendra Modi's administration has set an ambitious target of having EVs account for 30% of India's total car sales by 2030 from around 1% today.

Tesla's talks with India come at a crucial time for Modi, who is looking to attract investments in the run-up to national elections next year where he will be seeking a rare third term.

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