Tesla Eyes JV with Reliance for Indian EV Production: Musk, Ambani on the Move?

Tesla is apparently in talks with the Indian government to establish a factory in the nation, with intentions to start manufacturing in 2024. This may completely change the Indian electric vehicle (EV) market.In January 2024, at the Vibrant Gujarat Global Summit, a contract could be finalised that would enable Tesla to ship cars to India and possibly establish a factory in Gujarat, Tamil Nadu, or Maharashtra. In an effort to save expenses, the business is also thinking about producing certain batteries in India.

The government is excited about Tesla's possible entry into the Indian market because it wants to increase employment and lower the cost of EVs by promoting local production. Tesla's debut may be made possible by the government's current finalisation of a policy to extend concessional import tariffs on electric automobiles surpassing Rs 30 lakh (about $36,000) for two to three years. Tesla may offer lower import charges in exchange for bank guarantees if it decides to invest in building an electric vehicle manufacturing in India.

At the moment, India levies an import tariff of 60% on cars under $40,000 (about Rs 33 lakh) and 100% on cars over that amount. Nonetheless, Tesla has stated that it would be willing to invest up to $2 billion if the Indian government were to provide imported electric cars a 15% import duty reduction for the first two years of the business. The government is considering a temporary reduction in import taxes, contingent on bank guarantees, in order to secure timely investments and the construction of local firms. The precise amount of the bank guarantee has not yet been decided.

Although there is curiosity in Tesla's possible entry into the Indian market, Indian automakers are being cautious. Unfair advantages for Tesla in the absence of a solid investment plan have drawn criticism. Mahindra & Mahindra (M&M) managing director Anish Shah said last month that his company had told government representatives that foreign EV manufacturers needed to be persuaded to make investments in India. Local car giants like M&M and Tata Motors are already manufacturing electric vehicles.

With battery-powered vehicles making up just 1.3% of all passenger vehicles sold in India last year, the country's EV market is still very small. Tesla's possible investment in the country might have a big impact on this. If Tesla's cars are built in India, their costs may come down to as little as ₹15 lakh, which would make them more accessible to Indian customers.

Apart from establishing a factory, it has been reported that Tesla is in discussions with Reliance Jio to establish a private 5G network for its envisaged manufacturing facility in India. In addition to supporting connected automotive solutions and automated production processes, the private 5G network would handle critical functions around the manufacturing site at fast speeds.

The possibility of Tesla entering the Indian market is a big step forward for the nation's electric vehicle (EV) market, which may generate over 40% of the nation's income by 2030 and reach $100 billion in penetration. Strong adoption (over 45%) of two-wheelers and three-wheelers is anticipated to fuel the expansion, with the penetration of four-wheelers (cars) forecast to rise to above 20%.

The country's EV industry may undergo a radical shift as a result of Tesla's possible entry into the Indian market. The company's investment may increase employment, lower EV costs, and spur industry growth. To build a stronger sector in India, international EV manufacturers should be encouraged to invest there by the government and Indian automakers, who must make sure that Tesla's arrival is on an even playing field.