Why Modi govt’s big bet on Elon Musk in India might just work
Elon Musk’s long courtship of Indian officialdom may have finally paid off. Prime Minister Narendra Modi wanted him to open one of his Tesla “gigafactories” in the country, as part of its efforts to expand its long-moribund manufacturing sector; Musk, meanwhile, wanted India to address tariffs on electric vehicle imports that rendered foreign-made Teslas uncompetitive.
On March 15, the government announced a new scheme to promote investment in EVs. Any company willing to invest $500 million in a new manufacturing facility that begins production in three years (and with at least a quarter of its components added locally, to begin with) will also be allowed to import 8,000 high-end vehicles a year at a lower tariff of 15%. It’s generally assumed that this quid pro quo will be enough to get Musk — and, hopefully, one or two other companies, like Vietnam’s Vinfast Auto Ltd. — to bite. Certainly, the EV producers that currently dominate the Indian market are already bracing for competition.
On the one hand, this looks like business as usual. Officials have made a habit of using the supposed potential of the domestic market as an inducement for foreign investors. The stick of high tariffs together with the carrot of possible consumer demand growth should be enough to lure in people like Musk, they think.
That said, there’s a deeper story to be told here. Size matters: The Indian government is a big believer in the transformative potential of a single large investor. Officials expended enormous amounts of energy wooing
