Tesla may Drive Away From India

On Friday, Tesla CEO Elon Musk tweeted that his company wouldn't set up a manufacturing facility where it wasn't authorized to sell or service cars. His tweet answers a user's question about plans to build its electric vehicles in India.

Over the last three years, India and Tesla have clashed with market access and the conditions under which Tesla will consider manufacturing there. The government of Prime Minister Narendra Modi wants Tesla to manufacture cars locally from the beginning. Mr. Musk wants to reduce the import duty on cars to 100%. Meanwhile, Tesla seems to want to test the market with imported cars before working on manufacturing in India.

India's willingness to compromise seems short-sighted, as China's strict Covid-19 control policy has encouraged many foreign companies to start diversifying from factories around the world more seriously. The Indian government may be worried that allowing Tesla to simply import cars would hinder plans to attract other EV makers into the country, but for such high-end EVs India, itself is a small market.

If India dreams of competing with China as well as Southeast Asia as an electric vehicle hub, it needs either a big and lucrative domestic market or an export-friendly policy. It's not important to have the world's largest electric car maker manufacturing in India.