As Tesla announces India pricing for Model Y, the carmaker’s slow entry to India

The car can be registered in Delhi, Gurugram and Mumbai. (Express photo by Amit Chakravarty)

The car will also be able to be upgraded to full self-driving capabilities in the future, and enabling that would cost an extra Rs 6 lakh. “The activation and use of these features are dependent on achieving reliability far in excess of human drivers as demonstrated by billions of miles of experience, as well as regulatory approval, which may take longer in some jurisdictions. As these self-driving features evolve, your car will be continuously upgraded through over-the-air software updates,” Tesla said.

To be sure, the car is twice as expensive to purchase in India compared to the United States, where it costs around $38,000 (roughly Rs 33 lakh), owing to India’s high import duty on completely built units. Tesla has no plans of manufacturing in India for the time being, a minister had earlier said.

In the slow lane

The announcement of one of its models marks a close to the long awaited entry of Tesla into India, after founder Elon Musk had criticised the country’s high import duty structure. In 2021, asked by people on social media about Tesla’s launch in India, he had said, “We want to do so, but import duties are the highest in the world by far of any large country!” Import duties in India for such cars can go as high as 110 per cent.

In 2016, Musk had announced that pre-bookings for its Model 3 would be available for customers from many countries outside North America, including India. Soon, many customers in India put up a refundable deposit of $1000 (approx. Rs 85,000 at current exchange rate). However, earlier this year, the company initiated refunds to those who had paid the reservation fee as the Model 3 has been discontinued.

India’s first Tesla Store opened in Mumbai’s BKC on Tuesday. (Express Photo by Amit Chakravarty)

India’s courting of Tesla

After receiving complaints about the high duty structure, the government last year, released a new EV policy easing duty for a limited number of EV imports for manufacturers setting up facilities in India with a minimum investment of Rs 4,150 crore. This was largely seen as an attempt to woo Tesla.

In turn, they will be eligible to import a maximum of 8,000 completely built-in units (CBU) of electric four-wheelers per year, with a minimum import value of $35,000 at a reduced Customs duty of 15 per cent for a five-year period. The scheme is limited to global manufacturers with a revenue of at least Rs 10,000 crore per year, with fixed assets valued at a minimum of Rs 3,000 crore.

Currently, the customs duty on cars imported as CBUs is 60 per cent or 100 per cent, depending on engine size and whether the cost, insurance, and freight (CIF) value is higher or lower than $40,000. Where the car costs $40,000 or more, the duty is 100 per cent; a cheaper car attracts 60 per cent.

In 2021, Tesla had written to nodal central ministries seeking a reduction in import duties on fully assembled cars and had asked for duties to be cut to 40-15 per cent depending on the price of the car. The new policy effectively fulfills that demand.

The government said that the scheme is intended to promote EV manufacturing in India, a sector that is expected to grow into a major category within the automobile sector in the coming years. India is currently the world’s third largest automobile market and one of the fastest growing automotive markets in the world. The current market size of the automotive sector is Rs 12.5 lakh crore and the sector is expected to cross Rs 24.9 lakh crore by 2030. The automotive sector contributes over 7.1 per cent to India’s GDP.

However, despite easing the norms, Tesla has yet to show interest in making its cars in India. The company has massive assembly operations in China, which is a key market for Tesla.

Last month, Union Heavy Industries Minister H D Kumaraswamy said that Tesla was not interested in manufacturing in India but was looking at opening two stores. He, however, said that global EV makers like Mercedes-Benz, Volkswagen-Škoda, Hyundai and Kia have shown interest in applying under the ministry’s flagship Scheme to Promote Manufacturing of Electric Passenger Cars in India, notified in March last year.