This story was originally published on the Benzinga India portal.
Tesla Inc TSLA, under the leadership of its CEO Elon Musk, has reportedly agreed in principle to the Indian government’s proposal to not just assemble its electric vehicles in India, but also to establish a local vendor base.
What Happened? Tesla is not likely to postpone the creation of a domestic vendor base, as it values the integration of manufacturing and supply chains, according to a report from India’s Financial Express newspaper.
The move to start manufacturing in India would involve relocating these vendors to India, where they would need to collaborate with Indian firms, due to the Indian government’s discouragement of fully Chinese investments after border clashes between the two countries in 2020.
Observers note that Tesla will negotiate hard with India, as China is also currently vying to keep Musk’s investments. Musk recently met with top Chinese leaders.
The government has requested a roadmap from Tesla outlining the timeframe for establishing a local supply chain, expecting a response within three to six months.
Import rebates: Indian officials told the visiting Tesla team that they are willing to offer import concessions on necessary components until Tesla sets up its supply chain in India.
Just as it did with Apple under the smartphone incentive scheme, the government plans to offer duty protection on components needed for domestic car assembly to Tesla. However, Tesla must locally source these components within specified timelines.
If Tesla agrees to set up a manufacturing plant and provide a timeline for achieving local production targets, the Indian government may introduce a revised incentive scheme for electric vehicles and advanced chemistry cell batteries to attract new investments.