Tesla to build electric vehicles in India, local authorities say

Tesla may build a plant for the production of electric vehicles in India, said the minister of Karnataka, a southern state with its capital in Bangalore.

Tesla CEO (TSLA) Elon Musk’s Twitter promises that the company will enter the Indian market in 2021 may be true.

“The American company Tesla will open the production of electric vehicles in Karnataka,” BS said in a short statement. BS Yediyurappa, Chief Minister of Karnataka, a southern Indian state, was quoted by the media this weekend.

Tesla, which plans to launch production at new plants in Germany and Texas this year, has yet to make any official announcements about plans to build a plant in India.

Bloomberg, citing people familiar with the matter, said Tesla had been in talks with local authorities for six months and was actively considering assembling cars in the Bangalore suburbs.

The news was preceded by Tesla’s announcement in January of the merger of its subsidiary Tesla Motors India and Energy Private Limited, an Indian solar photovoltaic system manufacturer, with a registered office in Bangalore. Then B.S. Yediurappa said Tesla will start operations in India with a research and development department in Bangalore.

The city is considered the Indian hub for global technology companies and is becoming a hub for electric vehicles and aerospace professionals. However, unlike Tesla’s expansion in China and Germany, the automaker’s business in India may face less market potential and a longer payback period.

India’s plus for Tesla can be cheap labor and the country’s protectionism towards Chinese companies. Read more in Marketinfo.pro article “India’s ban on China’s tech giants gives companies like Facebook, Google, Apple and Amazon more chances.”

In 2019, India lowered the goods and services tax on electric vehicles from 12% to 5% and created the Fast Track Hybrid and Electric Vehicle Implementation and Manufacturing (FAME) program. FAME’s 2019 budget was around $ 1.38 billion in subsidies that span the entire industry from building charging infrastructure to subsidies to manufacturers of all types of electric vehicles.

At the same time, according to Reuters, India plans to offer incentives worth $ 4.6 billion to companies setting up state-of-the-art battery businesses.

For example, in early February, Business Insider announced plans by the German government and local authorities to provide Tesla with about 1 billion euros in subsidies to help finance the construction of its battery plant in the vicinity of Berlin.

Nevertheless, among the downsides of India, analysts point out that the electric car market in the country is still very small, besides, the price of Tesla electric vehicles is close to the premium class, which ultimately represents a rather narrow circle of potential buyers. According to BloombergNEF, electric vehicles account for about 5% of annual car sales in China, compared with less than 1% in India.

“Given the price of Tesla, Elon Musk probably won’t be able to sell the company’s electric vehicles to the majority of the population in emerging economies,” said Pedro Pacheco, senior research director at Gartner Inc. from Munich.

As such, Tesla’s plant in India can probably be seen by the company as a pure battery plant and an export base for several markets in other countries.

Announcing long-term plans to produce 20 million vehicles a year in September, Elon Musk pointed to the key problem in the shortage of batteries and announced plans to create his own battery production by 2023. Analysts then suggested that selling batteries to other automakers could be a big new revenue stream for Tesla.

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