The import penalties or restrictions that Musk referred to are most likely the norms for multinationals to set up single-brand retail in India, which mandate them to source at least 30 per cent locally.
Unlike traditional automakers, Tesla sells and services its vehicles on its own rather than through local dealers.
Even Apple has been trying to get India to waive its local sourcing norms temporarily. While in the past the government has indicated that it might make exceptions for high-tech products (presumably iPhones and Tesla cars), there has been no clarity yet.
Because of this, India’s current laws would mandate Tesla to set up a factory and begin sourcing components locally before even selling its first car here.
Last month, Musk had flagged this very issue while answering a query on Twitter about when the company would launch its business in India.
“Tesla always sells directly, but apart from asking for permission to sell directly, they might be looking for some concessions on the vehicles or the factory they want to set up. All these companies
come looking for special packages,” said Abdul Majeed, partner, assurance at PwC India.
India does not restrict import of automobiles by wholesalers, but it levies a huge customs duty of 119 per cent on a CBU (completely built unit). This was done to force global luxury automakers, which were eager to tap India’s growing base of rich individuals, to set up local manufacturing and assembly units.
Over the past couple of years, this policy has largely worked, with brands such as Mercedes-Benz, Audi, BMW, JLR and Volvo having units in India.
Experts believe that the government should do the same even for electric vehicles as it will help boost the local industry.
In discussions with the govt of India, requesting temporary relief on import penalties/restrictions until a local factory is built, says Elon Musk, chief executive, Tesla Motors