A Passage to India

A Passage to India

Recent reports indicate that Tesla is looking at building a Research and Development Center in Bangalore, India. Up until now, the EV manufacturer experienced some difficulty penetrating the South Asian market. With the increasing carbon emissions from the country’s growing economy, India has been exploring the roll-out of electric vehicles, so Tesla would be viable option even if it meant designing a model variant for the Indian market.

In 2016, Tesla boss Elon Musk started talks with India’s Transport and Highways Minister about his hopes of selling Tesla electric cars to the country. The minister, Nitin Gadkari even visited the Tesla Fremont factory to discuss introducing and increasing the adoption of pollution-free road transport.
However, as the year rolled into 2017, Musk still seemed to think it was inevitable. When asked on Twitter if Tesla was planning to launch in India, the Tesla CEO, replied, “Hoping for summer this year”.

Just 3 months later, Musk revealed on Twitter that there were conditions attached to the possibility of entering the Indian market and he felt they weren’t feasible at that stage. Musk said, “Maybe I'm misinformed, but I was told that 30% of parts must be locally sourced and the supply doesn't yet exist in India to support that.”  

The Indian Ministry of Commerce and Industry was quick to respond to Elon Musk and clarify issues around their manufacturing and importing policies:

Discussions faded and there was no further news on Tesla and India coming to an agreement. Then 2 years later in 2019, rumors started with Tesla showing interest in a battery factory project in India.But again, it was a non-starter and Musk took to his usual platform to announce the Indian market was not practical.

And here we are in 2020 with new reports that Tesla is talking to the Karnataka government in India to establish a research center:

“Tesla held exploratory discussions with Karnataka government officials on September 10, who are seeking a possible investment by the world’s most valuable carmaker in a research facility in Bengaluru, people familiar with the development told ET. A follow-up meeting is expected later this month, they said, during which the state officials are expected to present a detailed proposal to the Tesla executives.”

An Indian official who asked not to be named has said, “The first proposal is for an R&D center and we have already had at least two rounds of discussions." He also said that Tesla's head of India and Karnataka State Commissioner for Industry meet again later this month.

Bengaluru (also known as Bangalore) is already renowned as a research and development center for sectors such as aviation, biotechnology and information technology. Karnataka is actively seeking investment and has created a task force to pursue companies that want to relocate from China after the pandemic. Having the world's largest electric vehicle manufacturing company would no doubt further enhance its profile. Tesla would also be able to increase employment in the region using local talent in any of its projects that it could potentially setup.

For an emerging electric vehicle market like India, it would make sense for Tesla to introduce Model 3. And at some point down the road, a model variant Tesla Compact would be highly successful there. But ultimately, the cars must be produced at a competitive price. Therefore, Tesla will need incentives from government agencies to make its green technologies affordable to the mass market.

Elon is not giving up hope on his Indian dreams as he expressed on Twitter 2 months ago. When asked by Arvind Gupta about when Tesla will enter the country's market, the Tesla CEO responded: “Sorry, should hopefully be soon!”