Tesla Being Courted To Invest By Multiple States In India

India may be in its early days for electrification but the reality is that it will have to adopt the technology. For years Elon Musk has hinted that Tesla may launch in India, including last month on Twitter, but it now appears that we are seeing some concrete signs of life. Aaditya Thackeray, the minister of tourism and environment for Maharashtra has revealed on Twitter that he sat in a meeting which was helmed by Maharashtra's minister of industry, Subhash Desai who met with the team at Tesla inviting them to invest in the state.

“This evening I had the opportunity to participate in a video call by Industries Minister @Subhash_Desai Ji with @Tesla team to invite them to Maharashtra. I was present not because of just the investment but my firm belief in electric mobility & sustainability
@elonmusk,” Thackeray tweeted.

The Tesla Model 3 is the most affordable car from the company's line-up

“We are firmly committed to policy building and changes for sustainable development and I personally believe that electric mobility, supported by renewable energy is the way ahead. Let's hope we can help this thought become mainstream soon,” added the son of Maharashtra's chief minister.

This evening I had the opportunity to participate in a video call by Industries Minister @Subhash_Desai ji with @Tesla team to invite them to Maharashtra. I was present not because of just the investment but my firm belief in electric mobility & sustainability @elonmusk

— Aaditya Thackeray (@AUThackeray) October 22, 2020

Now Thackeray is not the first one to court Tesla. This news comes after it was revealed that Tesla was contemplating investing in Karnataka for an R&D centre in Bangalore as it wanted to leverage the IT talent pool of the region which is home to tech majors like Microsoft, Infosys, Google, Amazon, IBM and Xiaomi.

At its recent earnings report, Elon Musk didn't mention anything about a potential investment in India but did say that he wanted to achieve 20 million vehicles by 2030. This number wouldn't be simply possible without the world's fourth-largest automotive market and second-largest population.

Tesla has also announced plans to develop a $25,000 hatchback which will be designed in its Chinese Gigafactory. But there are more interesting signs that Tesla may be preparing for an imminent launch in India as per a CNBC report.

“We have channel checks from a couple of months back that indicates the entry into the Indian market is a very high probability for 2021, with a probable announcement in late 2020,” said Craig Irwin of Roth Capital to CNBC. “Tesla is in the process of selecting a site for a manufacturing facility in India,” said the analyst indicating a launch by the end of 2020.

Another analyst, David Whiston, from Morningstar equity, has also stated that Tesla may not have the regulatory issues that it had earlier. “For Tesla, it's different this time because they have more money than they've ever had and with the [Model] 3 and Y out, Musk may have more time to focus on expanding there [India],. If Musk “wants to do it and can get a good relationship with [Indian Prime Minister Narendra] Modi as he has with the Chinese government then it's more likely to work out,” said Whiston.

Only in October Musk revealed that there were plans to launch in India

Vivek Wadhwa was also cited in the CNBC report. He has been reportedly exchanging emails with Musk for years about India and seemingly, the billionaire has expressed a desire to expand into India. “There is no better time than now, given that his battery costs have dropped and he is expanding his manufacturing capabilities,” said Wadhwa, author of The Driver in the Driverless Car: How Our Technology Choices Will Create the Future.

India's technology thinks tank Niti Aayog recently shared a proposal for offering incentives of $4.6 billion to companies which are setting up advanced manufacturing facilities. This proposal is being reviewed by the government and if it goes through India could be ripe for Tesla as it is fishing for manufacturing facilities to make more batteries. It is even looking at Indonesia for the same purpose.

It also helps that India is a huge market. “India will be as big as China, and maybe even bigger as there are no trade or geopolitical conflicts impacting the background,” said Roth Capital's Irwin Told CNBC. This challenge is riddled with the fact that mostly, India is an affordable car market and even the recently announced $25,000 Tesla will blow past the financial ability of the average Indian.

Though for Tesla, it can wait and bide its time as now it needs to scale fast. Even if it can't sell many Tesla's to Indians, it can use India as a manufacturing hub while the market matures leveraging its cheap labour, developed auto parts ecosystem. “The demand picture has changed and now with Giga 3 build-out in China, Berlin and Austin, India is next,” he said, pointing to EV demand and the population growth in India as indicative of a massive market,” said Dave Ives of Wedbush securities who claimed that in five years India will represent 10 per cent of the demand for the company.

Tesla now has GigaFactories in China and Germany

Wedbush also notes India's importance in light of the US-China trade war which puts Tesla's business in China at risk. Importing vehicles from China to India will likely not be in play considering the military stand-off between India and China.

Though if the company wants to launch in India by 2021, it may have no option but to import its cars from China. And that's why Irwin says that a factory in India is a near certainty. He says India could have two factories by 2023 with the first one breaking ground in 2021.

Maharashtra and Karnataka are not the only contenders. Reportedly Gujarat is also in play which a big automotive manufacturing hub and the home state of PM Modi. “Several of the state EV policies have strong incentives for setting up manufacturing and gigaplants, including Telangana and Gujarat,” said Anjali Jaiswal, the senior director of international program India Team, Natural Resources Defence Council.