India loses out to China for Tesla’s factory

NEWDELHI: China made an exception to its local manufacturing norms, a sufficient-enough incentive to spur Elon Musk’s Tesla Inc to decide on building its first automobile factory outside of the US in Shanghai.

The Wall Street Journal on Sunday reported that the electric car maker had reached an agreement to set up its own manufacturing facility in Shanghai. The deal with Shanghai’s government will allow the Silicon Valley-based auto maker to build a wholly owned factory in the city’s free-trade zone, the newspaper reported.

A Tesla spokesman didn’t have a comment beyond reiterating the company’s previous statement in June that it planned to “clearly define” production plans in China by year’s end, the report said. The Shanghai government didn’t reply to a request for comment, it said.

So far, Chinese manufacturing laws have required foreign automakers to set up joint ventures with local partners, which involves splitting profits and sharing some technology, though they also avoid import tariffs.

India, widely seen as a potential rival to China’s economic dominance, is still formulating policies that will help the country achieve its objective of having an all-electric fleet of vehicles on the roads by 2030.

A Tesla factory in China may also mean that Musk may have overlooked Indian overtures to make the country a manufacturing hub for exports to South- and South-East Asian countries.

Sales of electric car sales in China increased at a compound annual growth rate of 179.4% in 2013-16 to 329,000 units, equivalent to a 1.4% sales of the total fossil-fuel run cars, according to Bank of America Merrill Lynch.

On the other hand, in India the concept of EVs is still at a nascent stage. In 2016, India saw 450 EVs, less than 1% of the entire market, hitting the roads, according to the International Energy Agency.

According to a Bloomberg New Energy Finance report, India currently has about 350 charging points while China (having the largest EV market in the world) had about 215,000 installed at the end of 2016.