A clean energy breakthrough could be on the horizon in Asia. Electric vehicle manufacturer Tesla has proposed setting up a new factory in India, the largest market in the world in which the company has no presence. This proposal follows Tesla’s failed request for India to lower its import taxes on cars, which can reach as high as 100 percent.
The electric vehicle maker had initially requested to test the market with imported cars, while the government wanted the company to manufacture locally. Talks ended in a stalemate, but negotiations have now resumed, with Tesla proposing a new factory for domestic sales and exports. Senior Tesla executives are in India this week to meet with government officials and to discuss local sourcing of parts, among other issues.
Tesla’s proposal for the new factory can be credited in part to Prime Minister Narendra Modi’s “Made in India” campaign, which offers foreign investors lower manufacturing costs compared to India’s neighbors. The Made in India campaign has proven attractive to global automakers seeking to reduce their dependence on China.
Tesla’s Indian expansion plans represent a significant shift in strategy. Thus far, the company has entered markets by first establishing a customer base and then producing electric vehicles. In India, Tesla will produce cars before it builds a customer base, in accordance with the wishes of the Modi government.
With India experiencing some of the fastest growth in car ownership in the world, it is unsurprising that Tesla chose to compromise with the government. Year-over-year car sales in India rose by 23% in 2022.
If Tesla can succeed in India, it will prove that electric vehicles are attractive enough to flourish in a variety of regulatory environments. And if this proves true, you can confidently say that electric vehicles are well on their way to replacing gas-powered cars.
