KT Rama Rao makes a pitch to Tesla CEO Elon Musk for setting shop Telangana

After Tesla Founder & CEO Elon Musk said his company was facing challenges to launching operations in India, KT Rama Rao, the Industry & Commerce Minister of Telangana made a pitch to the former to set shop in Telangana.

“Will be happy to partner Tesla in working through the challenges to set shop in India/Telangana,” the minister said on Twitter responding to Musk. “Our state is a champion in sustainability initiatives & a top notch business destination in India.”

Responding to a query on Tesla’s India plans, Musk had tweeted on Thursday: “Still working through a lot of challenges with the government.”

The world’s most valuable car company has pitched for a cut in import duties ahead of its local launch. Tesla has said that the levies imposed by India are the highest among large countries and that it can only consider setting up a factory locally if it succeeds with imported models.

India charges 60% duty on vehicles with a net CIF (cost, insurance, freight) value of up to $40,000 and 100% duty on vehicles costing more than that. All of Tesla’s vehicles will be subject to the higher duty given their pricing. Tesla has sought 40% duty.

To be sure, import duties is a central subject and out of the purview of state governments.

New Delhi was not very happy with Musk’s tweets.

“The government has put in place a PLI scheme for auto sector, particularly EVs under which Tesla will get benefit if they produce here. However, the company wants the government to reduce import duties on cars without any commitment of producing in India,” government sources told ET.

“By such tweets, Tesla is trying to put pressure on government using social media, and this is not the first time.”

Musk, who regularly features on Bloomberg’s index of the richest on the planet, has previously said the duty structure for cars running on the electric powertrain should not be out of kilter with India’s climate-change objectives.

The intent of the government was to enable Tesla to manufacture vehicles in India, said several officials assessing the matter.

Earlier in December 2021, ET had reported that the Ministry of Heavy Industries has suggested that the American carmaker consider local assembly of semi-knocked down units to avail of reduced levies on kits and subsequently scale up to full-fledged manufacturing, instead of seeking a cut in customs duties. However, according to officials, Tesla has said its cars currently cannot be assembled from kits. The discussions are ongoing.

“The government is open to discussing a temporary reduction in import duties, say for a period of three years. But for that, they first have to submit firm business plans,” a source had said, adding that concessional duties could not be extended merely on the basis of “intent” to invest.

“India is a mature market, a very large market,” this person said. “The thinking is they cannot ask for concessions for testing the market. Tesla already sources components. Then why can they not manufacture vehicles here? They have to make some commitment.”


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