Elon Musk hints at delay in Tesla's India plans due to local sourcing norms

India has been on Elon Musk’s radar for a long time now. Photo: Reuters
India’s local sourcing norms could stand in the way of Silicon Valley electric carmaker Tesla’s entry into the country which founder Elon Musk had earlier hinted could happen as early as ‘this summer’.

“Maybe I'm misinformed, but I was told that 30 per cent of parts must be locally sourced and the supply doesn't yet exist in India to support that,” Musk said on microblogging platform Twitter, in response to a question on whether the company would release its cars in India in 2017 or 2018.

Tesla had opened up bookings for its most affordable Model 3 sedan in India in April 2016, with tech sector leaders like Vishal Gondal, Vijay Shekhar Sharma, Mahesh Murthy and Vani Kola showing interest. The $35,000 Model 3 sedan is expected to hit the road between late 2017 and early 2018.

It isn’t clear how and when Tesla plans to service customers in India who had pre-booked its Model 3 sedan. Moreover, even if the company makes a formal entry into the country later this year or next year, India lacks adequate charging infrastructure, especially for high-voltage electric vehicles such as those Tesla builds.

While India has set an ambitious target of moving to 100 percent electric mobility by 2030, it is continuing to push for local sourcing in order to boost the country’s manufacturing sector. Tesla, which is more akin to a technology firm than a traditional auto manufacturer would find it hard to meet the 30 per cent local sourcing norm from day one.

A workaround to India’s local sourcing requirements for Tesla could be to manufacture the lithium-ion batteries here, a move which Musk had said would make more sense for Tesla in the long run. “Given high local demand, a Gigafactory in India would probably make sense in the long term,” Musk had said in 2015.

However, while India has been on Musk’s radar for a long time now, it’s unlikely that the company would rush to manufacture batteries here anytime soon. Tesla began producing lithium-ion cells at its own Gigafactory facility in the Nevada desert in January, with only a third of the facility said to be complete.

Indian Prime Minister Narendra Modi met Elon Musk and toured the Tesla headquarters during his visit to Silicon Valley in 2015. The two leaders are said to have discussed the implications of development of battery technology, energy storage and renewable energy for India. Musk had apparently made a pitch for bringing the company’s Power Wall energy storage unit to the country.

Earlier this month, Tesla began taking orders for its Solar Roof - roofing tiles embedded with solar panels - with Musk saying that it could be ordered from almost any country. However, on the company’s website, India did not figure on the list of countries where Tesla would take per-orders for its Solar Roof.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel