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Elon Musk-run electric car maker Tesla is reportedly in talks with the Indian government regarding setting up retail outlets in the country

As per the foreign direct investment (FDI) norms, foreign retailers with more than 51% FDI are required to source a minimum of 30% of the value of purchased goods domestically

The development comes after four Tesla models cleared the homologation phase and are ready for a launch in the country

India might soon see Tesla’s retail outlets in multiple cities of India as the major electric vehicle (EV) automaker is in talks with the Indian government for the same.  The Elon Musk-led electric car maker is reportedly in discussions with the government regarding the norms and regulations required for the US-based company to set up retail outlets in the country, as it will have to comply with the foreign direct investment (FDI) along with the local sourcing norms. 

As per the FDI norms, foreign retailers with more than 51% FDI are required to source a minimum of 30% of the value of purchased goods domestically.  

According to a Business Standard report, Tesla might be sourcing components that are required for manufacturing its vehicle in the country. Earlier reports have suggested that the EV manufacturer is in talks with original equipment manufacturers (OEMs) for sourcing parts such as steering wheels, light weighing of forged parts, among others.  The FDI rules allow a foreign company to include a third-party deal to meet the mandatory local sourcing norms. 

The development comes after multiple reports suggested that Tesla’s four models have cleared the homologation phase and are ready for a launch in the domestic market.

Initially, Tesla was looking to import its high-tech electric vehicle in the country. However, Musk who enjoys a following count of 55 Mn on Twitter publicly said that India’s import tax on EV import is highest in the world. Back then Musk who is quite active on Twitter was responding to an Indian Youtuber who had asked when Tesla was launching its cars in the country. 

In a reply, Musk wrote: “We want to do so, but import duties are the highest in the world by far of any large country! Moreover, clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India.”

On the same day, responding to another Indian user, he said that if Tesla succeeds in importing its cars in India then it will set up a factory in the country. 

India at present imposes 100% import duty on fully imported cars with CIF (cost insurance and freight) value of more than $40,000 and 60% on cars whose CIF value is less than the amount. Later reports surfaced that the central government was planning to give some respite to automakers who are importing vehicles from other countries. 

Musk’s take on India’s import tax was not taken well with India’s Bhavish Aggarwal, who had launched its two electric scooters under Ola Electric. He had said that India should indigenously build electric vehicles. As per Inc42 Data Plus report, market share of EV commercial vehicles is expected to be $20 Bn by 2030. The report highlights that the country is expected to touch 28 Mn units by 2030. 

At present, India holds a little of 0.5% in the global electric vehicle market. However, it is expected that the growing popularity of EV two wheeler and three wheeler will help in faster adoption of EVs.  Tesla’s entry to India as a commercial four wheel EV manufacturer is likely to bring more interest towards EVs in the country. However, the cost of Tesla cars will play a crucial role in it.