Tata Motors Challenges : Tata Motors (TAMO.NS) is urging Indian officials to resist slashing the 100% import taxes on electric vehicles, asserting the need to safeguard the domestic industry and protect investor interests amid Tesla’s push to enter the market, according to sources familiar with the matter.
As India aims to bolster domestic manufacturing and the adoption of electric vehicles (EVs), Tesla is proposing the establishment of an Indian factory but is seeking reduced import taxes for electric cars. India is contemplating a new policy to lower import taxes on EVs, potentially as low as 15%, with a commitment to local manufacturing. This could enable Tesla to set up a local factory for its proposed $24,000 car while importing higher-priced models with lower taxes.
Contrary to Tesla’s previous approach, which failed last year, Tata has raised objections in meetings with Prime Minister Narendra Modi’s office, contending that its investors made decisions under the assumption that the tax regime favoring local players would remain unchanged.
Tata argues that India’s EV industry needs greater government support during its early growth stages, emphasizing the disparity in taxing imported gasoline or diesel cars at up to 100%, despite the well-developed nature of the industry. Lowering duties for foreign players, Tata asserts, could adversely impact the entire domestic industry and compromise the investment climate.
Tesla’s strategic shift contrasts with its earlier unsuccessful plan that simply advocated for lower duties in India. Tata, one of India’s major automakers, entered the EV business in 2019, attracting significant investments in 2021, valuing the EV business at around $9 billion.
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While India’s EV market is relatively small, Tata accounts for a substantial share, with 74% of the 72,000 electric cars sold so far this year being made by the company. Tata’s concerns include potential risks to future fundraising if lower duties are granted to foreign players. Tesla, eyeing India’s vast auto market, is seeking to make inroads in a country where over 3 million cars are sold annually. Although EVs constitute a minor share in India, the government’s promotion of clean cars and the rapidly growing sector make it an attractive market for global players.
Prime Minister Modi, directly involved in talks with Tesla since his meeting with CEO Elon Musk in June, is steering discussions to facilitate the U.S. giant’s entry into the Indian EV market. The Indian government is attempting to address the concerns of local automakers, emphasizing the easing of entry for foreign players in the EV sector while assuaging fears of potential adverse impacts on the local industry. Talks with Tesla are ongoing as India navigates its evolving EV landscape.
India’s aspiration to become an EV hub aligns with global goals, with a target of 30% of annual car sales being electric by 2030, up from the current 2%. The nation faces challenges in developing charging infrastructure and encouraging EV adoption, and a comprehensive policy addressing industry concerns is in the works. As India engages with Tesla, other countries are also vying for the attention of the U.S. electric vehicle giant. This week, Thailand’s Prime Minister expressed confidence that Tesla would invest in the country after executives from the company visited to explore potential opportunities.
Our Reader’s Queries
What are the threats of Tata Motors?
Tata Motors is up against some tough competition from both local and global automotive manufacturers, including Maruti Suzuki, Hyundai, and Toyota. These rivals, ranging from new startups to well-established giants, are able to provide comparable or even better products at competitive prices.
What are the challenges faced by Ratan Tata?
Acquiring British steelmaker Corus in 2007 was a major hurdle for him. The $12 billion deal was a significant foreign acquisition by an Indian company at the time.
What was the reason for loss of Tata Motors?
Tata Motors has experienced a decline in market share in recent years, largely due to their outdated selection of vehicles.
What are the challenges of Tata Nano?
Tata Nano encountered a series of obstacles, including safety concerns, quality problems, and incidents of catching fire. However, Tata Motors made an effort to reposition and relaunch the Nano as a more sophisticated and feature-packed vehicle to overcome these initial setbacks.