Tesla’s official entry into the auto market in India has been a long time coming, and it looks like progress is finally being made in that direction. The all-electric carmaker is now in talks with Karnataka government officials to open a research and innovation center, according to a report published by Indian Times. A follow-up to the discussions is expected later this month.
“Tesla has shown initial interest to invest in a research and innovation centre in Karnataka and the talks are at a preliminary stage,” an official involved with the talks was quoted as saying by the publication.
Karnataka is noted as the first state in India to establish an electric vehicle policy, and that effort is geared towards raising significant investment in zero-emissions technology. Eleven other states in the country have since followed suit. “We all accept that the future is electric, it is now time to embrace electrification as an opportunity to create a self-reliant and cleaner India,” a report by Indian financial services firm Avendus stated in July. The report also estimated that over 3 million EVs will be sold nationwide by 2025.
India’s regulations look to be the main hurdle for Tesla’s entry into the country thus far. “I’m told import duties are extremely high (up to 100%), even for electric cars. This would make our cars unaffordable,” CEO Elon Musk tweeted about the issue last August. “Would love to be in India. Some challenging government regulations, unfortunately.” Musk also indicated this past July that he was hopeful the Model 3 would make its way to the country ‘soon.’
Tesla’s entry into India has been speculated about since at least 2015 when Prime Minister Narendra Modi was given a tour of the Fremont factory. Musk indicated on Twitter in 2017 that talks were underway regarding temporary relief on import penalties and restrictions until a factory was built. Those discussions look to have fallen apart in one way or another. Confusion about sales restrictions was also cited that year with Musk detailing a requirement that 30% of manufacturing parts be locally sourced in India to enter the market, although that understanding was disputed by the Indian government program Make In India.
Plenty of opportunities still exists for Tesla to be competitive in India’s nascent EV arena, especially since the Model 3 is the most-searched-for electric car in the country, per a study from UK research company Compare the Market. However, the company will likely have to take advantage of local incentives to be competitive due to a market saturated with low-cost gas and diesel cars. This incentive approach was used in China, even prior to the completion of Tesla’s Gigafactory 3 in Shanghai. Perhaps getting a foot in the door with a research and development center will help the company make progress with local authorities in that same direction.