India has crazy high import duties and price limits on just about everything. When extremely aggressive tax polices are put in place, even the most trusted chief execs are likely to assume the worst about a country. Case in point is a recent tweet made by Elon Musk, the CEO at Tesla Inc . Responding to a question about his company’s intentions to enter India, Musk said the country’s protectionist laws make that unlikely at this time. While investors are pretty sures that India is a long way off, Musk’s reason for not entering the country is kind of false.
“Maybe I’m misinformed,” he tweeted. “[But] I was told 30% of parts must be locally sourced and the supply does not yet exist in India to support that.” Musk sent that out last week, failing to cite any sources or readdress the matter.
Thing is, he truly was misinformed. India does have a heap of elaborate policies set to favor its people and economy. That is a well-known fact. For instance, the number of motorcycles in the country is more than 5.3 times greater than that of ordinary cars. The demand for second-hand bikes in India is, quite frankly, mind-blowing as a result. In light of this, the government slaps a 100 percent tax on all imported, used motorcycles.
Want to know the import tax on new bikes that are below 800cc? Those are taxed at 60 percent. Motorcycles imported in SKD pay 30 percent while those brought in in CKD are charged a 10 percent import duty. Yet the automotive sector holds no local sourcing policy of 30 percent.
Tesla Inc fans can’t help but wonder how Musk came across his information. However, since the chief executive asserted these false details off the cuff, investors have reason to assume that India is not on Tesla’s radar right now. It kind of feels like Musk needed a quick excuse to defer his company’s entry into the country.
There are reasons which the CEO could have cited to validate Tesla’s non-presence in India. For one (the biggest one), access to power in the country remains scarce. In an nation made up of 1.2 billion people, 300 million of them have no access to power in their homes.
Many of those who do receive power live with spotty supplies of electricity. Entire municipalities can go days with little to no supply, as well. In short, the country has spectacularly unreliable power grid — reason enough for an electric car manufacturer to stay clear of India.
TSLA investors might see Tesla Inc in India after all
Yet the Indian subcontinent deeply craves low emission vehicles. The government there is working tirelessly at not only luring electric car makers into the country, but shifting the motoring population to lower-emission vehicles.
Nitin Gadkari, India’s Transportation and Highways Minister, paid TSLA a visit in 2016. He sought a partnership to help introduce and increase the adoption of “pollution-free road transport”.
Still, the country would rather not see Musk and his company merely importing and selling Teslas. The current government is hugely assertive when it comes to growing the economy, creating jobs and promoting India as a global manufacturing superpower. A recent tweet from India’s ministry of commerce and industry was directed at Musk. TSLA is welcome to enter India, it said, but only if it manufactures in the country too.
Does Tesla Inc have an immediate future in India? Well, Elon Musk recently said he plans to announce four new Gigafactory locations. It is not unlikely for India to have made it onto his list.