You won't see Teslas in India anytime soon: Elon Musk will tell you why

 The country's age-old, protectionist instincts have kept out international auto companies for decades.

India wants to get on the electric vehicle bandwagon and is introducing China-style policies to pursue its green ambitions. But there’s a wrinkle: its age-old, protectionist instincts, which have kept out international auto companies for decades.

Last month, Elon Musk bemoaned India’s restrictive policies, tweeting that while Tesla Inc. wanted to make cars there, “import duties are the highest in the world by far of any large country." Clean energy vehicles were “treated the same as diesel or petrol” ones, he added. Hyundai Motor Co. soon echoed Musk’s complaint, noting that cutting duties on imports of electric vehicles would help “reach some economy of scale in this very price competitive segment."

While Musk tweeted he is “hopeful” there will be some temporary tariff relief, he’s right: India’s deeply protectionist approach continues to be a huge deterrent for foreign companies. Unlike many other parts of the world, where governments are embracing EV policies to meet emissions goals, the administration of Prime Minister Narendra Modi has had a single-minded focus on its Make in India campaign, an effort to get its industrial manufacturing sector up and running.
Foreign carmakers eager to get a shot at a market of more than 1 billion people are effectively forced to pay the price — or sit it out. Duties on importing a set of unassembled parts containing an engine and gearbox, known as a Completely Knocked Down kit, are around 15%. That compares with 100% for importing a fully built car with a price tag of more than $40,000, 60% for cheaper vehicles, and 50% for two-wheelers.

But making a car isn’t just about having the parts — the precision and quality of manufacturing are critical, too. No one knows this better than Musk, who went through his own “production hell” to make 5,000 Model 3 sedans at Tesla’s Fremont, Calif. factory. Yet India hasn’t built up the necessary capacity to pull off large-scale output. As a result, the country has failed to become a big exporter of quality cars that cater to global markets, even though it has the potential. Most foreign manufacturers have struggled to gain a foothold because of punitive requirements to use local content, which translates into big investments with relatively little return.