Tesla scraps plan for plant in India, raising hopes in Korea

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Tesla scraps plan for plant in India, raising hopes in Korea

Published: 22 May. 2023, 17:44

Tesla's Shanghai gigafactory [REUTERS/YONHAP]

Expectations of Korea attracting a Tesla "gigafactory" are rising after the electric vehicle (EV) maker's initial plan to build a plant in India has been scrapped after a year-long incentive conflict with the local government.

"Gigafactory" is a term used to describe Tesla’s large-scale manufacturing plant.

President Yoon Suk Yeol has been taking the initiative in attracting the factory, promising more incentives in the hopes of attracting Tesla to invest in Korea.

A delegation of Tesla executives left for India to discuss the possible local sourcing of components and incentives but “stopped short of proposing to build vehicles in the country,” Bloomberg reported.

The executives reiterated their concern about India’s high tariffs on imported cars. The government doesn’t plan to change its tax regime to accommodate one automaker, said Bloomberg.

India currently imposes a 100 percent tariff on imported vehicles valued at more than $40,000.

Tesla CEO Elon Musk said last year he will soon announce plans to build its second gigafactory in Asia after China

Tesla has been eyeing entering India, the country with the world’s third largest auto market, after China and the United States and ahead of Japan.

President Yoon Suk Yeol, right, chats with Tesla CEO Elon Musk during their meeting at Blair House in Washington on April 27. [JOINT PRESS CORPS]

Discussions between Tesla and India reached a stalemate last year after Prime Minister Narendra Modi’s administration insisted Tesla sell locally-made cars, while the automaker wanted to first import them at lower taxes to gauge demand.

The breakdown of the negotiations offers hope for Korea, with Musk saying the country is one of his top candidates for the gigafactory during his meeting with President Yoon in Washington in April.

Yoon gave Musk a brochure titled "Korea for the Next Gigafactory," and promised Tesla some support like incentives regarding location, workforce and taxes.

A total of 34 local governments including Busan, Daegu, Incheon and Pohang in North Gyeongsang are reported to have sent letters of intent to attract the gigafactory.

Tesla currently runs five gigafactories around the world, three in the United States, one in Shanghai and one in Berlin. A gigafactory is expected to have around 1 million annual production capacity and create more than 30,000 new jobs.

Bloomberg reported in January that Tesla is close to a preliminary deal to set up a factory in Indonesia, which will have an annual capacity of 1 million.

BY SARAH CHEA [chea.sarah@joongang.co.kr]