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TWISTS AND TURNS

Where does Tesla’s Indonesian move leave India’s nascent EV industry?

REUTERS/Shannon Stapleton
Finding a replacement.
  • Niharika Sharma
By Niharika Sharma

Reporter based in New Delhi.

Published Last updated

Tesla’s much-awaited new Asian Gigafactory is reportedly inching closer to reality—in Indonesia, and not India as was widely expected.

On May 19, the Indonesian government confirmed a deal with the US-based electric vehicle (EV) maker, revealing few details. Earlier, the company had set off rumours of nixing its India plans over tax issues after CEO Elon Musk met the Indonesian president.

The company remains tight-lipped, not replying to Quartz’s queries. Nevertheless, if it does really make the shift, India’s nascent EV industry is likely to be disappointed.

“Tesla’s entry would have attracted more investment in the EV industry which may result in an improved overall supply chain and EV charging Infrastructure. So, Indian EV makers will lose out on these benefits,” said Gaurav Kapoor, director and co-founder of taxation firm Fincorpit Consulting.

Indonesia’s gain is India’s loss

Tesla’s possible India entry was announced in 2021, when it registered an office in Bengaluru, Karnataka, cheering the local EV industry and allied segments.

“In the long term, part localisation by Tesla has the possibility for the automotive component industry to upgrade and grow,” Deepak MV, CEO and co-founder of Etrio, an EV mobility solutions provider, had earlier told Quartz.

Not anymore, though.

What’s worse is that other global carmakers, apparently influenced by Tesla’s move, are also rethinking their India plans. Ford recently dropped its EV plans, for instance.

Why Tesla is unwilling to come to India just yet?

India’s high import duties may have scuppered Tesla’s debut in the country. Audi had similar concerns. Industry experts, however, believe such demands are unrealistic.

The Indian government wants Tesla to manufacture here, not in China, but the firm is keen on securing a viable market before committing anything more.

“The government’s aim is to promote EV sales, and tax rebates are short term goals,” said Rohit Sharma, director of engineering at JD Concord Design Solution, an automative product design firm. Lower duties won’t help the Indian EV industry in the long term, he said.

What will help is incentivising manufacturing.

“The government policies will help the industry to grow and reduce the production cost, and increase direct and indirect employment,” Sharma said.

What’s next for India’s EV sector?

Not all is lost, though. There may even be an upside to Tesla’s shifting out of India, analysts said, adding that the local industry’s momentum will continue.

“Indian EV makers will have more freedom in terms of pricing and the threat of competition with global players will also be eliminated,” said Kapoor of Fincorpit Consulting.

Neither will many consumers lose much since Tesla’s cars are hardly for the “masses but for a niche community,” according to JD Concord’s Sharma.

The government, on its part, is trying to lure others companies. For instance, prime minister Narendra Modi met Suzuki officials on May 23.

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