India was hoping that American electric car manufacturing company Tesla would be choosing the country to build its first car factory outside the U.S. However, the Indian government’s 'Make in India' initiative received a blow when Tesla boss, Elon Musk chose India’s arch rival China instead. Tesla will have its new car plant build in Shanghai, China, as per The Wall Street Journal report.
According to the report, Tesla has signed an agreement with the Shanghai government to build the American company’s first international car manufacturing facility. The report also says that Tesla will be the sole owner of the car factory and not the local manufacturer.
China, the world’s largest car market is going the electric vehicle way in order to thwart the great menace of terrible pollution in all its large cities. Recently, the country is also contemplating on relaxing some of its strict regulations regarding local partners in order to attract more global electric vehicle (EV) manufacturers into the country, which will help it to transform its auto industry into an all-electric one more efficiently in the future. Nevertheless, the Chinese government is not expected to offer Tesla exemption from the 25 percent import tariff.
The Indian government was hoping to bring in Tesla to the country for similar reasons, as the government has a vision of an all-electric auto industry by 2030, although it seems to be very ambitions given the lackluster electric market in India. The Indian union transport minister Nitin Gadkari had earlier visited Tesla with the proposal of a joint venture between the American company and an Indian automaker. India’s Prime Minister, Narendra Modi had also visited Tesla’s Fremont facility back in 2015.
Earlier this year, Elon Musk in a social media post, confirmed that his company is discussing with the Indian government. The EV maker had also requested a temporary respite on import penalties as well as restrictions until it builds its local factory in India. Musk also said that perhaps he is misinformed, but he was told that 30 percent of the auto parts are mandated to be locally sourced in India, but the supply doesn't exist in India yet to support the mandate.
In Musk’s reply India's commerce and industry ministry had quickly informed him clarifying the fact that the country’s Foreign Direct Investment (FDI) policy does not order any minimum local sourcing of parts by the car makers.
Anand Mahindra, the head of Indian SUV master Mahindra & Mahindra had also invited Elon Musk to be part of India's upcoming electric-vehicles market, earlier this year. Musk had responded to Mahindra with a crisp "Good point".
However, despite all these talks and hopeful discussions and clarifications, Musk finally chose to build his first overseas car plant in China instead. While Tesla’s decision is certainly disheartening to India, the country is hopeful in attracting many other global auto giants. Meanwhile, the Indian auto market is hoping to receive many new EV models from Nissan, Honda and even Tesla in the coming years.