TESLA INCHES CLOSER

Elon Musk, co-founder and CEO of Tesla Inc., announced last year that the California-based electric vehicle firm would enter the Indian market in 2021.

"Definitely next year," Musk stated on Twitter in response to a question on Tesla's India plans.

Tesla confirmed its plan to enter the Indian market last year by incorporating Tesla India Motors and Energy Private Ltd, a wholly owned subsidiary. Mr. Musk has long mentioned India as a country where Tesla would like to have a footprint. While he has emphasized the market's enormous potential, he has also highlighted the obstacles that India poses.

When Tesla formed a local firm earlier this year, the prospect of a Tesla factory being built in India sounded enticing. The Tesla move reinforced hopes that India, much like the United States, China, and Europe, could one day be able to join the ranks of global EV production hubs. However, these hopes are beginning to fade. Despite the excitement, Tesla's entry into India could be difficult. The country hasn't yet thrown open its arms to electric vehicles like its neighbor China, where Tesla opened its first manufacturing outside of the United States and currently dominates premium EV sales.

According to BloombergNEF, electric vehicles account for roughly 5% of China's yearly car sales, compared to less than 1% in India. Building a presence in the Indian automobile sector will be difficult, given that electric vehicles account for barely 1% of the country's yearly car sales and Tesla's vehicles are extremely pricey.

Other reasons for India's lag in the electric transition include a lack of charging infrastructure and funding for enterprises developing electric vehicles. The luxury EV industry in India is still in its infancy, and charging infrastructure is minimal.

Tesla Inc. is one step closer to making its debut in India after receiving approval to produce or import four models in the South Asian country. But it looks like Tesla's plans to expand in India have encountered a snag, with Elon Musk, the company's billionaire CEO, pushing for lower tariffs on electric vehicle imports to test the market before establishing a factory in Asia's third-largest economy. Elon Musk tweeted last month that India's import taxes are among the highest in the world, and that the country deems clean energy vehicles the same as petrol or diesel, contrary to the country's climate goals. Hardly 5,000 electric automobiles were sold in India last year, out of a total of 2.4 million. Electric vehicles costing less than $40,000 are subject to a 60 percent import tariff, while those costing more than $40,000 are subject to a 100 percent duty. Analysts believe that at these rates, Tesla vehicles will become far too expensive for purchasers, potentially limiting sales.

Elon Musk's biz has been seeking a reduction in import duties on electric vehicles and related components from the Indian government since it plans on importing its vehicles in fully assembled form at first. According to Bloomberg, Tesla has already written to India's transport and industries ministries, urging them to reduce the import fee on electric cars from 60 to 100 percent to 40%. India imposes a 100 percent import charge on fully assembled electric vehicles, and global corporations such as Tesla and Hyundai have urged the union government to consider lowering the duty in order to foster a robust electric vehicle sector. Mercedes-Benz and Audi, two premium or luxury vehicle manufacturers, have already debuted their respective electric vehicles in India.

Several local players objected to its request for tax reduction, which was originally reported by Reuters in July, claiming that such a move would discourage investment in domestic manufacturing. Lowering taxes for a limited time and allowing Tesla to enter the market might "improve India's investor-friendly image and green credentials," according to one government official, while also luring more investment.

It may be a rocky ride, but considering the potential for development once the business picks up, the payoffs might be tremendous.