Will Tesla Make in India

India has been trying to entice foreign manufacturers to set up their factories in India as per its “Make in India” policy, which plans to significantly increase the share of manufacturing in India’s GDP and provide opportunities to the hundreds of millions of unemployed/underemployed Indians. While some of these efforts are bearing fruit, it is not going at the desired pace at which the government would like.

Land and labour continue to be major hindrances, with red tape and corruption at the local level continuing to be a major block for interested investors. Though the central government is pushing hard, it has been difficult to get manufacturers to set up factories in India. The global economic slowdown has also been a dampener.

While IT companies keep setting up offices in India to tap India’s vast cheap and skilled workforce, industries have been reluctant given the labor issues as well India’s under developed infrastructure in terms of power, roads, ports etc. Indian government is now inviting leading electric car maker Tesla to set up its first factory outside USA in India. Tesla which is coming up with its first mass consumption product the Model S plans to open a factory in China. India on the other hand, wants to get an edge over competition in this new age product by offering cheap land and logistics help to Tesla.

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I don’t think Tesla is going to set up a factory in India anytime soon. India’s automobile market though large consists mainly of cheap cars in the $10,000-20,000 range, while Model S would be priced higher. It makes more sense for Tesla to set up a factory in China, which will have many more consumers. Infrastructure is also a huge problem in India, as compared to China or even other SE Asian countries such as Thailnad, Vietnam and Malaysia.

Tesla would also be apprehensive about investing such a lot of money in India, which does not have a great track record in terms of manufacturing success. India’s much vaunted Foxconn investment of $5 billion has yet to see execution, despite a huge lot of incentives being offered to the Taiwanese company to kickstart the semiconductor manufacturing ecosystem in India. Despite efforts by top government leaders, the plans still remain on paper without a single dollar being invested till date.

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The “Make in India” policy may not be of too much help to improve India’s disastrous employment situation, given that factories these days are technology and automation heavy and require very few workers as compared to the factories in the olden days. With robots taking over a lot of the functions, manufacturing has stopped being a panacea for unemployment issues.  While I am appreciative of the government’s initiatives, I don’t think it is a long term solution to India’s economic and social problems.

During a visit to the Tesla factory here, Gadkari offered to promote joint ventures between the global leaders in electric car manufacturing and the Indian automobile companies with a view to introducing pollution-free road transport in India, especially commercial and public motor vehicles.

Source – TOI