New scheme for EVs – This may put global majors in fast lane

Source-This post on new scheme for EVs-This may put global majors in fast lane has been created based on the article “New scheme for EVs may put global majors in fast lane” published in “Business Standards” on 16 March 2024.

UPSC Syllabus-GS Paper-3– Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context– Companies like Tesla and its upstart rival Vinfast have demanded a reduction of import duties from the Centre for manufacturing of electric vehicles.

Why did the government not reduce import duties for Tesla?

1) There was opposition from domestic players like Mahindra and Mahindra (M&M) and the Tatas. They claimed that reduction of import duties would be unfair because the government has set high localization thresholds for domestic companies.

2) Tesla did not set up its manufacturing plant in India. The government asked Tesla to first set up plant in India rather than merely import from China.

What is Tesla’s new plan for India?

1) The company is ready to invest $3 billion in the plant. Further, its partners have also planned to invest another $10 billion.

2) It intends to double component supplies from India to $1.7-1.9 billion.

Why is manufacturing in India Important for these global companies?

1) They can take advantage of India’s vibrant components’ industry in the country. This industry was already supplying Tesla for years

2) India has a huge domestic electric vehicle market. As per some estimate, it would account for 15 % of total car sales by 2030.

3) This would help the car giant to reduce its over dependence on China, for both sales and production.

What is the significance of Tesla and Vinfast investment for India?

1) Boost to supply chain– Entry of global iconic brand like Tesla and Vinfast  could make a big difference to India’s influence in the global manufacturing supply chain.

2) Rise of export– It will enhance country’s EV technology base and make India a hub for such exports.

There are enough safeguards for domestic companies. Market of electric top-end car manufactured by Tesla is very less in India. It does not impact the broader, larger and the growing EV market in India.

Question for practice

How can Tesla’s investment create a win-win proposition both for India and Tesla?