New Delhi: There is a sense of déjà vu’ on the present levels of near hysteria concerning Tesla Motors and India.
Ever since the story first broke out on the electric carmaker’s decision to seek new hires, there has been a literal avalanche of news on its likely roadmap for India. States are on overdrive to woo Tesla with Maharashtra and Andhra Pradesh reportedly leading the way with Tamil Nadu not too way behind. Perhaps there will be more added to the list in the coming days and weeks.
The hysteria is a reminder of the time in the first half of 2022 when Elon Musk, CEO of Tesla, had tweeted about India’s high import duty levels for cars and why this was impacting his company’s entry into this market.
In no time, representatives from West Bengal, Telangana, Tamil Nadu, Maharashtra, Punjab and Karnataka tweeted right back that they were ready to lay down the red carpet for the company. The only problem was that the latter was in no mood to join the party even while India remained smitten by Telsa and its CEO who is now part of the bigger stakes play in the Donald Trump administration.
High tariffs
In a recent joint interview with the President, the clear message that was sent out was that tariff levels in India were way too high and it just made no sense to contemplate manufacturing. Trump was absolutely categorical that this was unfair to companies like Tesla.
Now when the US President makes such a strong statement which is devoid of any ambiguity, it is now a million dollar question if Musk will be inclined to consider any such plan. India, of course, had rolled out an electric vehicle policy early last year which was perceived as the biggest bait for Tesla in terms of offering a slew of goodies.
As per this policy, companies investing USD 500 million for their EV projects would be allowed to annually import 8,000 cars, costing at least USD 35,000, for five years at 15% duty. At that point in time, Musk was tipped to visit India and announce mega investments for Tesla. However, he changed his mind at the last minute citing ‘heavy Tesla obligations’ following a lacklustre quarter.
There is now a rebooted EV policy that is in the works in India which could perhaps offer even more incentives for Tesla to set up shop here. The million dollar question is whether this will still attract Musk to be part of the passenger car EV arena which already has a host of brands ranging from Tata Motors, Mahindra & Mahindra and JSW MG Motor to Hyundai Motor and Mercedes-Benz.
Bigger canvas for Musk
The Tesla CEO also has bigger plans in his new role as an important part of the Trump team at the White House. Will he still be inclined to micromanage Tesla which is now no longer in a position of invincibility and faces formidable competition from the Chinese led by BYD?
Going by what Trump said in the recent interview with Musk, he would certainly be a lot more pleased if there is no manufacturing criterion for Tesla and it is allowed to import its cars directly at lower duty levels.
According to the EV policy, minimum investments of USD 500 million are an imperative to import cars at 15% duty for five years. The end objective is mass manufacturing which is in sync with India’s Atmanirbharta slogan of self-reliance.
For Trump, however, the bottomline is reasonable tariffs, else he will have no hesitation in reciprocating with hefty levies on imports from India into the US. From the auto industry’s point of view, this may not matter much given the marginal numbers shipped out to the US but it is a different ballgame when it comes to other sectors like pharmaceuticals where exports to America are quite substantial.
Near impossible prospects
Will India now change its EV policy so dramatically that the manufacturing investment clause is waived and CBU imports of electric cars are slashed to much lower levels? This is next to impossible since other manufacturers have already invested in their EV projects and this would end up becoming discriminatory to one player.
Beyond this, going in for something like this would defeat the purpose of Atmanirbharta except that this is not going to cut any ice with the US. The Trump administration will see this as being extra protectionist and will refuse to play ball unless there is something attractive offered in return.
There was a time when a top gun of the Indian auto industry told this writer,“I just don’t understand why India is so obsessed with Elon Musk. His coming to India is not going to make a difference except for a few hundred people who will buy a Tesla. If he wants to come to India, he has to come on our terms and not on his (terms).”
Well, it is crystal clear that Musk and Tesla matter to India and having him onboard clearly makes for good optics. The fact that he is more tilted towards politics now, which also makes him extra powerful, is another charisma booster. Despite the Chinese now breathing down his neck with a host of competitive products, Musk is still perceived as the the biggest disruptor in the EV space and remains a favourite reference point for the industry.
Rough road for US auto brands
It is perhaps pertinent to mention at this juncture that American auto brands have not particularly had a great run in India. One of the earliest entrants, General Motors, struggled right through its two-decade plus stint and finally called it a day when it was crystal clear that it did not have a viable solution for the market.
Harley-Davidson , the iconic motorcycle maker, entered with a bang but achieved little eventually. It shut down its plant and has now rewritten a new revival script with Hero MotoCorp. However, its loyal riding community still has issues with availability of accessories and parts.
Ford also decided to exit India nearly four years ago and went through a long process of selling its Gujarat plant and offering a separation scheme to its Chennai facility workforce. However, in an interesting volte-face, the American automaker has now decided to restart its India innings from Chennai following a series of persuasive talks with the Tamil Nadu government.
Will the Trump administration take kindly to Ford resuming its India operations at a time when MAGA (Make America Great Again) is the oft repeated slogan? Ford has not indicated if it is having second thoughts about India but there is no telling what is in store given the huge levels of uncertainties and surprises that characterise today’s world of geopolitics.
