Govt Wants Tesla To Buy Local Auto Parts Worth $500 Million, Says Report

Tesla would need to agree to ramp up Indian parts purchases by around 10 per cent to 15 per cent a year until a satisfactory level was achieved, according to the report

The government has formally told Tesla to ramp up domestic sourcing, but is yet to relay a procurement target to the company. Image: Getty

New Delhi: The government wants Tesla Inc to commit sourcing at least $500 million of auto components from India for the electric carmaker’s request for an import tax cut on its vehicles to be considered, Bloomberg reported quoting a source in the know.

According to the report, Tesla would need to agree to ramp up Indian parts purchases by around 10 per cent to 15 per cent a year until a satisfactory level was achieved, the person said, asking not to be named because the discussions are private.

The Centre has formally told Tesla to ramp up domestic sourcing, but is yet to relay a procurement target to the company, the person said. Tesla in August claimed it sourced around $100 million in parts from India.

The government has said it is keen for Tesla to make cars in the country, but appears to be using their interest to try and gain benefits for the Indian industry.

Tesla said that it wants to test the waters by selling imported cars first, and to make that viable, levies as high as 100 per cent would need to be lowered. India is still a value-conscious auto market dominated by cheaper gasoline cars and clean transport remains a fledgling industry, with EVs just 1 per cent of cars sold annually.

To progress on its tax-cut bid, Tesla must approach the government with a component-sourcing plan that’s proportional to its car sales forecast in India, the person said. It should also export made-in-India components to China if it plans to import cars from there, the person told Bloomberg.

Tesla and a representative for India’s ministry of transport didn’t respond to requests for comment.

In July, Tesla CEO Elon Musk tweeted that import levies in India were among the highest in the world and that the nation treats clean-energy vehicles the same as gas-guzzling cars, which isn’t consistent with its goal of reaching carbon neutrality.

According to Road Transport Minister Nitin Gadkari, India has been engaged in a long-time border dispute with neighbor China and last year asked Tesla to avoid selling cars made at its Shanghai factory in India. 

Earlier, the Minister of State for Heavy Industries Krishan Pal Gurjar told the Lok Sabha that there cannot be a situation where the market is India but jobs are created in China. Tesla is yet to apply for schemes according to the government’s policy, the minister said.

Tesla is desperate to import and sell its electric vehicles in India and has for nearly a year lobbied officials in New Delhi to reduce tariffs, which the company’s CEO Elon Musk said that tax are among the highest in the world.