Tesla would never set up its manufacturing plant in a country where it wouldn't get permission to sell cars before setting up the plant. This was said by the CEO of Tesla, Elon Musk in a similar tweet, an Indian individual asked Elon Musk to launch Tesla in India as soon as possible. Elon Musk replied straight away, that India has the highest import duty in the world compared to any other country This statement is right. In India, the CIF or Cost Insurance Freight of any vehicle is under $ 40,000 or INR 32 Lakh, in this case, a 60% import duty is levied, and if CIF exceeds $40,000 then a 100% import duty is levied and an additional amount of 10% is charged for Social Welfare named CESS.

Due to this reason, the Indian government suggested Tesla that Tesla should assemble the complete knockdown unit of its cars in India and take 30% of the parts from local manufacturers. Still, Tesla stood its stubbornness and replied that the Indian Manufacturers were incapable of assembling the sophisticated parts of the Tesla. Due to this statement, the Road and Transport Minister of India, Shri Nitin Gadkari answered in an interview with India Today that, if Tesla thinks that they can sell cars in India by manufacturing them in China, they won't be permitted for this at any cost.

Nitin Gadkari's Forceful Impact: Tesla Manufacturing in India

Still, now there is a twist in the story this battle that started in the year 2017 between Tesla and the Indian Government has come to an end. Tesla has lost the battle, according to the report published by the Financial Times. Now Tesla is interested in setting up its manufacturing plant in India. In this article, you will delineate how Tesla changed its mind and pivoted to 180 degrees! how this is an extraordinary achievement for India and the Indian government? To know about vacillating thoughts by Tesla. We have to dig deep into the roots of Tesla.

The History of Tesla: From Denial to India Entry

Tesla has been a revolutionary company since its beginning. They do not sell a car but the technology Tesla Roadster was launched in the early days of Tesla since it was a sports car it was not bought by many customers. But the launching of the Tesla Model S was an interesting event it was a luxury car that attracted people from all around the world. The launching of the Tesla Model 3 in the year 2017 was a bigger event. Because it was a mass-market electric car gradually it became the best-selling electric car in the world. 

Due to these cars, Tesla captured 50% of the EV car market in the US. Now this looks very fascinating but the ground reality is somewhat harsh. By the way, In the year 2019, 59 Million units of fossil fuels-based cars were sold around the world and only 2.1 Million units of EV cars were sold which only 3,66,000 units of Tesla Electric cars were sold in the year 2019. The biggest point to note is that 50% of the revenue of Tesla is generated in the US alone this makes it clear that Tesla does not have a major global presence and that's why Tesla wants to expand globally.

Why Tesla wants to expand Globally?

The manufacturing of Tesla cars is done in giga factories at their full capacity, These factories can produce 2 billion units of EVs around the year and Tesla has 3 such factories in the US. One each in Nevada, New York, and Texas but if look, apart from the US Tesla has two other giga factories as well one each in Germany and Shanghai, China. It is not a surprising fact that Tesla opted for Germany to set up its manufacturing plant since it is an auto hub similar to China is the largest auto hub in Asia. 

Tesla has highly benefitted from this decision Tesla had revenue of $ 40 Billion in the US and from China. Tesla generated revenue of $ 18 Billion gradually, China became the second largest market for the US where Tesla was selling 40% of EVs. Tesla was selling 50% of its cars in the US, 40,% in China, and the remaining in the rest of the world but everything isn't fruitful for Tesla in China.

Overcoming China's Dependency

Tesla was undoubtedly earning money from China but it also had to face many difficulties there what can be the biggest problem in the market? Yes, competition. China is the second-largest market for Tesla. But Chinese Manufacturers like BYD, Nio, Geely, Xpeng, etc. are giving tough competition to Tesla in the local market of China and their USP is a competitively lower price. 

As Chinese cars are much cheaper in comparison to these, the price of Tesla ranges from $ 40,000 to $ 70,000 in China and apart from this, the incentives provided by the Chinese government for pushing local industries and non-implementation of IP rights is a big problem for Tesla. In China due to these IP rights, Chinese Manufacturers can copy any product without any hesitation. They make various versions of Range Rover, Jeep Wrangler, etc. they can copy any product. Now these are the problems associated with the operation of Tesla in China.

The second problem Tesla must face in China is the quality Issue. We all know the manufacturing quality of China, especially in the early stages of any new product and if we look at the report published by Bloomberg then Tesla has to reduce its manufacturing capacity by around 56000 units due to quality issues. From December 2022 to December 2023 due to this bad quality of manufacturing, Tesla had to recall 1 million units of EVs. Apart from this, the US-China trade war is another problem for Tesla. 

“South China Morning Post” is a China-based news portal, According to a report published by this portal Chinese Government has suspended Tesla from expanding its manufacturing line in Shanghai. In the meantime, in March 2021 Reuters reported that due to suspicion of spying, The Chinese government is not allowing government servants to park their Tesla cars outside their offices due to these problems. The sales of Tesla in December 2022 were reduced by 21% on a year-on-year basis due to these problems, Tesla understood that it does not only require a major market. But a market whose relationship is good with the US and India is one of them.

Why Tesla Sees India as Its Only Viable Option?

Tesla wants to capture the South Asian Markets and as discussed above Tesla is fed up with China the second option which is the only viable option for Tesla to manufacture its cars is in India. Despite ignoring India easily in the year 2017 but now Tesla could not do this and the biggest reason for that is the work done by the Indian government in the past few years. To establish the ecosystem of Electric Vehicles in India. India might have started it late but now the Indian government is stringent regarding carbon emissions.

Schemes regarding Electric Vehicle

By the year 2030, the goal of the Indian government is to reduce carbon emissions by 45%, and by the year 2070, achieving the goal of net zero carbon emissions and EVs are going to play a major role if foreseen. That is the reason why the Indian government has launched the “Fame Scheme” which is the Faster Adaptation of Hybrid and Electric Vehicles. In this Scheme, the consumers are incentivized to buy Electric Vehicles, this policy actually works especially in cost-dominated markets like India and looks at the success of this scheme.

The Indian government has launched Fame-2 here an investment of 10,000 crores will be made under this scheme, EV infrastructure like charging stations and setting up plants for the manufacturing of batteries used in EVs. An estimated 20 Lakh passengers would be benefitted from this scheme additionally  4,00,000 charging stations would become functional. Together with this, the Indian government has asked companies like Ola and Uber to keep 40% of their vehicles as EVs in their fleet.

The semiconductor venture of Vedanta and Foxconn 

Apart from this, the Indian government is working hard to establish the EV ecosystem in India. In September 2022, a joint venture of INR 1,54,000 Crores was established with Foxconn and Vedanta For the Manufacturing of Semiconductors in India Semiconductors are highly essential. Semiconductors are used massively in EVs in comparison to IC Engine based vehicles, we can understand this fact with the example of vehicles manufactured by Ford. Ford’s focus is an IC engine-based vehicle it uses around 300 semiconductor chips but Ford Mach-E is an electric vehicle it uses around 3000 semiconductor chips. Hence setting up semiconductor manufacturing plants is highly important. 

Apart from this, Indian OEMs have even developed large component bases in India. Here fabricators, differential gears, and motors would be manufactured. Even after all this god made a joke with Elon Musk massive mines of Lithium were discovered in Jammu and Rajasthan and that's why major Indian brands like TATA Motors would be able to invest in the batteries of EVs. This shows the changing ecosystem of EVs in India Due to these reasons, Tesla is forced to set up its manufacturing plants in India. Selling and exporting cars from India the biggest credit for these achievements goes to none other than “Shri Nitin Gadkari”. This type of vision and attitude gives a direct warning to Tesla that you are heartily welcomed in India. If not, you will suffer because good electric vehicles are now being manufactured in India.

After all these initiatives We should learn from these for the future before opting for foreign-brand EVs we should establish the infrastructure and ecosystem for EVs in India. So foreign countries are forced to come to India whether by wish or not, now Tesla is going to manufacture its EVs in India.

How this will benefit India? 

The biggest benefit of the establishment of manufacturing plants in India would be the collaboration of Tesla with local manufacturers. Due to this, the local components suppliers and other companies would learn a lot. In contrast, the engineers working in these local firms would become highly successful when the people working inside Tesla would switch to some other Indian company or any other company operating in India. Their knowledge would be delivered to those companies this is very obvious. 

The biggest example of this is American Rivian, an Electric truck company. Many engineers work here that once used to work at Tesla, share their knowledge with each other With this, they can deliver superb electric trucks consumers would also be one of the most benefitted people in India. 

Tesla after introducing its vehicles in India the Indian companies or the foreign companies operating in India would be forced to introduce technological advancements. They would also be forced to bring their vehicles at cost-effective prices. That would be beneficial for the Indian consumers and market as well.

Thus, the relentless efforts of the Indian government, particularly Shri Nitin Gadkari's remarkable efforts and strategic approach influenced Tesla's decision to open a manufacturing plant in India, defying Elon Musk's previous denial.