Tesla puts plans to enter the Indian market on hold

• Tesla is ignoring the Indian market for the time being
• Negotiations on tariff relief unsuccessful
• Strong demand in the rest of the world could lead to an order freeze

Although Tesla CEO Elon Musk had already announced in 2017 that he wanted to sell Tesla vehicles in India from the summer of that year, nothing has come of these plans to date. The main obstacle is the high import tariffs that the country levies on electric cars: a full 100 percent is due when importing electric cars that cost more than $40,000, and it is still 60 percent for cheaper vehicles.

In July 2021, Musk tweeted that while he was still sticking to his India plans, import tariffs were “by far the highest of any major country in the world.” Almost six months later, in January 2022, the Tesla CEO admitted in a tweet that the negotiations with the government in New Delhi still faced “many challenges”.

Different goals

As a result of the high import duties, Tesla feared being at a disadvantage with cost-conscious Indian customers, which is why the US group tried to negotiate at least temporary tariff relief. But the government wanted more than just imports, they wanted Tesla to also produce in India and only provided incentives for this.

New Delhi has already had success with this strategy at Mercedes-Benz. The German car group has announced that it will at least partially manufacture its luxury electric car EQS locally, which will reduce the duty on required components to 40 percent. But Tesla, on the other hand, wanted to use imports to explore demand before deciding to produce locally. After all, electric cars only account for a small proportion of new registrations in India, even though the government is now focusing more on climate protection and is therefore aiming for 30 percent of private cars to be e-cars by 2030.

negotiations failed

As “Reuters” now reports, citing informed circles, no progress has been made in the talks, even after more than a year of negotiations. That is why Tesla has now put its India plans on hold for the time being. The search for suitable properties for showrooms and service centers in major cities such as New Delhi and Mumbai was therefore stopped and the small Tesla team responsible for lobbying in India was partly assigned to other tasks.

Strong demand

In addition to the unresolved customs issue, an informed person told Reuters another reason why Tesla now wants to stop importing its vehicles to the subcontinent. The demand in the rest of the world is already very high.

Increasing environmental awareness, state subsidies in many places and rising fuel prices are causing the demand for electric cars to skyrocket. However, car manufacturers lack components because supply chains are interrupted due to the corona pandemic and the Ukraine war. “Demand is currently outstripping production at a crazy rate,” said Elon Musk in an interview at the Financial Times Future of Cars Conference. In view of this, Tesla will “probably limit or completely stop accepting orders for anything that goes beyond a certain period of time because some of the delivery dates are more than a year in the future,” the Tesla boss further announced. Against this background, it also explains why the e-car pioneer is refraining from opening up a new market like India for the time being, especially when faced with high import duties there.

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