Why Tesla makes in China, not in India

Source: This post is created, based on the articles:

“Why Tesla makes in China, not in India”, published in Business Standard on 26^th May 2023.

“Don’t Just Musk Up”, published in The Times of India on 26^th May 2023.

Syllabus Topic: GS Paper 3 – Industrial Policies in  India

Context: While China’s local Electric Vehicles manufacturers are doing well, India’s indigenous companies are still struggling to scale up EV development in India.

Chinese carmaker BYD is giving tough competition to tesla in the field of Electric Vehicles manufacturing.

An article from South China Morning Post highlighted how BYD sold 1.86 million electric and hybrid cars in 2022, which is 42% more than Tesla.

A report by JD Power puts Tesla as only the 10th most desirable electric vehicle brand in China, behind natives such as BYD, Xpeng, Nio, and Li Auto.

What is status of EV manufacturing in India?

India has two main homegrown car manufacturers: Tata Motors and Mahindra and Mahindra.

Tata Motors is the leader in electric cars, but their numbers are small compared to BYD. Mahindra had an early start in electric cars but hasn’t made much headway. Other companies like Maruti Suzuki have shown interest in hybrid vehicles and are planning to launch electric vehicles in the future.

Why is Tesla no manufacturing in India?

Due to the slow progress of local manufacturers, it seems not to be threatened due to loss of EV market in India.

The earlier plans of tesla to bring Model 3 to India could not be completed due to some issues:

First, it wanted India to reduce their import duties on the EVs. Which was not accepted by the government.

Secondly, the government wanted Tesla to manufacture in India, instead of China.

Although Tesla has shown interest to set up in India, but it is not going to be very soon.

What are the challenges faced by India in EV production?

Recent changes to FAME-II are expected to increase a customer’s acquisition cost.

Batteries, which account for about 40% of an EV’s total value, are predominantly produced in China.

Chinese, Korean, and Japanese companies control the processing of materials in the battery supply chain.

What can be the course of action for India?

India needs to look beyond Production-Linked Incentives (PLIs). For instance, the US recently introduced substantial subsidies to stimulate the EV supply chain.

India’s potential lithium reserves can give it advantage in becoming a battery manufacturer, but it requires policy changes.