Apple has offered the Western world ample proof that India is fertile ground for manufacturing. By starting production of iPhones in India, it has set an example for other Western manufacturing giants who may earlier have deep doubts about India’s capacity to host companies willing to divert manufacturing from their China factories. One of these companies could be electric car maker Tesla which has earlier tried to enter India.
Will Tesla follow the ‘Apple‘ cart? It is highly likely, considering the recent developments.
Of late, India seems to be on the mind of Tesla CEO Elon Musk. Recently, Musk hinted that he likes Indian food, especially butter chicken with naan. Last month, Musk finally decided to follow Prime Minister Narendra Modi on Twitter, according to reports. A screenshot of Musk’s ‘following’ list on Twitter did the rounds on social media. This became a talking point on Twitter, many interpreting it as a sign of Musk warming up to India after it could not get a deal from the Indian government to sell Tesla cars last year. A few weeks ago, he responded to India becoming the world’s most populous country by remarking on Twitter: “Demographics is destiny.”
Why Musk’s sudden interest in India on Twitter seems significant is the renewed effort by Tesla to negotiate with the Indian government. A group of senior Tesla executives plan to visit India this week to meet with government officials in a newfound bid to deepen the carmaker’s supply chain in the country, news agency Bloomberg reported. Last year, Musk had commented that he was working through a lot of challenges with the Indian government
The executives are scheduled to meet with government representatives including those from the office of Prime Minister Modi to discuss local sourcing of components for Tesla’s models.
While not much can be read into this development, it certainly points at Tesla willing to renegotiate its way into India. With continued America-China tensions and Apple’s successful entry into India, many companies such as Tesla must be considering India as the right option now.
Earlier, Tesla’s India manufacturing plans could not advance due to the Indian government’s refusal to offer special benefits. Musk had criticized India’s high import taxes, and India, in turn, had advised Tesla not to sell cars in the country that have been made in China.
Manuj Khurana, policy and business development executive at Tesla in India at that time, lobbied the Indian government for more than a year to slash the import tax on electric cars to 40% from as high as 100%, a move Tesla said would allow it to test the market with imports from its production hubs like China before investing in a factory. But the Indian government insisted that the EV maker must first commit to manufacturing cars locally before the government can offer any concessions on imports.
Tesla had even hired a local team and begun a search for showroom space, but that was also abandoned last year, and the team members either left or were diverted to focus on the Middle-East and the larger Asia-Pacific markets.
Musk is known to be a hard bargainer. He could have delayed India plans to get a better deal from the government, Last year, Global Times, a mouthpiece of the Chinese Communist Party, had commented that Musk’s decision to hold back Tesla’s India entry could be a strategic move as the electric car-maker would still eye the Indian market for its potential. Tesla might just use the suspension of negotiations with the Indian government as a business strategy to further promote the negotiation.
Meanwhile, Musk has been considering Indonesia as an alternative manufacturing location. Indonesia has the world’s largest reserves of nickel, which is used extensively in making batteries. Joko Widodo, the president of Indonesia, has personally invited Musk to manufacture cars in his country. He could use his revived India negotiations as a bargain chip — or he can use his Indonesia plans to drive a better bargain in India.
