Tesla bowed down to the conditions of the government, manufacturing units will be set up in India and vehicles will be assembled

Elon Musk's Tesla has agreed in principle to the suggestion given by the central government. In which it was said that apart from assembling its electric vehicles in the country, it should also set up its own vendor base here.

The tussle between the world's richest man Elon Musk's Tesla and the Government of India seems to be coming to an end. Tesla has accepted the conditions of the Government of India, in which it was said that the company will have to assemble its vehicles in India only and after that it can work as a vendor. The way Tesla has taken a step forward by accepting the conditions of the government, the Government of India has also softened its stand a bit. On Tuesday too, news had come quoting sources that the government is not thinking of giving any concession to Tesla, but the state is free to do so. This means that the government also does not want the deal with the world's largest EV maker company to be abandoned and if Tesla's manufacturing unit is established in India, apart from jobs, there will be growth in the manufacturing sector as well.

What can be Tesla's planning

Elon Musk's Tesla has agreed in principle to the suggestion given by the central government. In which it was said that apart from assembling its electric vehicles in the country, it should also set up its own vendor base here. However, the government has said that the company can first start with domestic assembling of cars and later set up a vendor base. On the other hand, there are indications towards Tesla that it will not delay in setting up the domestic vendor base. The company does not believe in separation of manufacturing and supply chain. At present, more than half of Tesla's global production takes place in Shanghai, China, where the company has also developed a large seller base. The company has also recently built a megapack battery factory there.

There will be a need to form a joint venture

If the company starts a manufacturing base in India, it would mean that these sellers would be transferred to India. Sellers would then need to form joint ventures with Indian firms, as India has banned 100 per cent Chinese investment following a border conflict in 2020. If experts are to be believed, Tesla will strike a tough deal with India as China is currently pushing Musk to retain its investment in the country. Musk had recently visited China and met the top leaders there.

Concessions will be available for a limited time

According to FE's report, the government has asked Tesla to put forward a roadmap on the time frame required to set up a domestic supply chain. It is expected that the company will deposit it in the next three to six months time. Officials told the Tesla team that visited the country last month that as long as the company sets up its supply chain here, the government is ready to give import concessions on components required for it. Such a scheme currently works for the Smartphone Production Linked Incentive Scheme under the Phased Manufacturing Program (PMP). Officials said that the government is ready to give time to set up a domestic vendor base, but Tesla will have to give a hint of that tenure. Because after that the duty concessions on the component will end.

Revised PLI scheme can be brought

Once Tesla agrees to set up a manufacturing plant in the country, as well as meet the indigenization level in the timeframe, the government may come out with a revised PLI scheme for electric vehicles and advanced chemistry cell batteries. This will be for those companies which did not invest in the first phase. Official sources said that the amendment coming with PLI 2.0 will not be a new thing, which will be done only to include Tesla in the scheme, as has been done earlier for Telecom Products and IT Hardware PLI scheme.

Tesla is not making pressure

The current outlay for advanced chemistry cell batteries is Rs 18,100 crore and for automobiles and auto components is Rs 25,938 crore. Sources said that in the revised PLI scheme for both, outlays may be increased, incentives may also be given, and participating companies will be given an option to migrate to the new one. Tesla is no longer pressing for reducing the import duty on manufactured units, which is 100 per cent for cars costing $40,000 and above, reports FE. The duty on cars priced below this is 60 per cent. Earlier, Tesla's demand was to reduce the duty to 40 percent.