India Tells Tesla Not to Import Electric Cars Built in China

Indian Transportation Minister Nitin Gadkari said on Tuesday that Elon Musk’s Tesla Inc. is welcome to manufacture or sell electric cars in India, provided the company does not import vehicles built in China.

“Making in China and selling here is not a good proposition,” Gadkari warned, without going into details about what measures his government would take if Tesla decided to test that proposition.

“If Elon Musk is ready to manufacture in India, then there is no problem,” he said. “Come to India, start manufacturing. India is a large market. They can export from India.”

The Times of India noted the administration of Prime Minister Narendra Modi informed Tesla last year that it must manufacture cars in India to obtain long-desired tax concessions.

India charges very high tariffs, as high as 110 percent, on fully-built cars imported from other countries, a practice the U.S. government has criticized as a “prohibitive” barrier to electric vehicle makers, who would prefer to use imported vehicles assembled at expensive existing facilities in other countries to test the Indian market before making huge investments in local manufacturing.

Several Indian states have been vying to host Tesla plants, but Musk cited India’s incredibly high tariffs as an obstacle to investment, saying they would make his products “unaffordable” to Indian customers. Tesla incorporated an Indian branch last year and has obtained regulatory approval to sell a number of its car models in early 2022, but has been hesitant to proceed with Indian expansion as long as the tariffs are in place.

Indian ministers responded by expressing concerns, as Gadkari did on Tuesday, that Tesla would flood the Indian market with vehicles built at its Shanghai “gigafactory” if the tariffs were relaxed.

Tesla stock fell by about ten percent on Tuesday, a tumble analysts attributed in part to India keeping its doors closed to Chinese-built cars. Some interpreted Gadkari’s comments as a final refusal to grant Tesla’s tariff reduction after months of Indian officials seeming to entertain the request.