Will India Really Woo Tesla For Large-Scale Vehicle Production (Not Assembly)?

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A few days ago, I spotted the following Reuters headline: “Exclusive: India woos Tesla with offer of cheaper production costs than China.” Intrigued, and thinking there was some real news on what Tesla is going to do in India, I opened the link and read through the story. However, the key point is that there’s no sign the wooing attempt has been successful so far. There is Tesla movement/progress in India, as we’ve reported previously, but the extent of Tesla’s entry into India is unclear. In fact, the Reuters article itself may primarily be part of the wooing attempt.

I should note that the question in my headline above is not a rhetorical question — I don’t presume to know the answer. I honestly just think that’s one of the most interesting Tesla-related questions right now and thus wanted to write about it more and hear more opinions to see if I can learn something from our engaged readers here on CleanTechnica.

First things first, the core news, which we reported in January and February, was that Tesla is setting up manufacturing unit in Karnataka, India. However, there’s still a question of whether that will simply mean assembling vehicles in India or a full-on gigafactory like Tesla is still building in China, Germany, Texas, and Nevada. After all, CEO Elon Musk has said before that they will need a bunch of gigafactories (not just 4), and his aim is to produce 20 million vehicles a year by 2030.

That’s where I’ll return to the new Reuters story. India’s Road Transport & Highways Minister, Nitin Gadkari, specifically focused on the matter of manufacturing vs. assembly in his first quote in the article. “Rather than assembling (the cars) in India they should make the entire product in the country by hiring local vendors. Then we can give higher concessions,” Gadkari said.

The article also mentioned that the Indian government was putting incentives on the table for Tesla in order to try to get it to set up real manufacturing capacity in the world’s second most populated country (and soon its most populated country). We don’t have specifics as to what incentives the government is offering Tesla, but Gadkari gets to the heart of the matter with another statement in the piece. “The government will make sure the production cost for Tesla will be the lowest when compared with the world, even China, when they start manufacturing their cars in India. We will assure that,” he said.


Image courtesy of Tesla.

India wants jobs. And the government knows that a lot more jobs will come from a full gigafactory than an assembly facility. There may be an even bigger point at play, though. What beats Tesla when it comes to marketing by association? If India can say that it attracted a Tesla gigafactory, just the 3rd one outside of the USA, that will become a big part of the country’s pitch to other companies when trying to get them to set up manufacturing facilities or other big business units in the country. The goal goes far beyond Tesla and even far beyond the automotive and energy sectors. It is about India’s image abroad for all types of businesses and its ability to attract foreign investment. It is about countless jobs and immeasurable economic growth.

Of course, to some extent, it is also about cutting the country’s air pollution with a quicker shift to electric vehicles, something India has wanted to be a leader on, and stronger action on climate change — which has already been absolutely devastating to India as certain natural disasters and heat waves have grown.

However, while the Indian ministers and activists pushing for a Tesla gigafactory in India do focus on low production costs and exporting vehicles from India to other countries in the region, there are a few domestic facts that make an Indian Tesla gigafactory more questionable than a Chinese one:

  1. The Chinese automotive market is much bigger than India’s — 20 million automobile sales in China in 2020 versus 2.4 million in India.
  2. The Chinese electric car market is even much bigger, relatively speaking, than India’s electric car market — 1.25 million “new energy vehicles” in China versus 5,000 in India.
  3. India doesn’t yet have strong policies requiring or incentivizing electric vehicle sales.

Gadkari is trying, though. He claims that 80% of the components of a lithium-ion battery are now produced in India. And he wants to build a hyperloop from Delhi and Mumbai. I guess you could call him an Elon Musk fanboy, and a powerful one at that.

What do you think? Does India have a Tesla gigafactory in its future? Or will it just have an assembly facility for limited Tesla demand in India?



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