{"id":124800,"date":"2022-01-25T13:02:18","date_gmt":"2022-01-25T13:02:18","guid":{"rendered":"https:\/\/fin2me.com\/?p=124800"},"modified":"2022-01-25T13:02:18","modified_gmt":"2022-01-25T13:02:18","slug":"lessons-teslas-musk-can-learn-from-apple-to-enter-india","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/lessons-teslas-musk-can-learn-from-apple-to-enter-india\/","title":{"rendered":"Lessons Tesla’s Musk can learn from Apple to enter India"},"content":{"rendered":"

The tech giant learnt the hard way that patience, negotiating flexibility and industry cooperation work better than public statements and tweets when attempting to enter India.<\/strong><\/p>\n

Surajeet Das Gupta reports.<\/strong><\/p>\n

<\/strong><\/p>\n

Tesla’s tryst with India is clearly not going as smoothly as it may have expected.<\/p>\n

That is why two years after Elon Musk first announced that his company would come to India, then registering a firm in Bengaluru to import cars and holding discussions on setting up company-owned retail showrooms, the maverick entrepreneur’s terse Twitter response to a query was: “Still working through a lot of challenges with the government.”<\/p>\n

Musk has made no secret through Twitter that India’s import duties (60-100 per cent) on electric vehicles (EVs) are the highest in the world among large countries and the company has asked for a sharp reduction as a condition for entry.<\/p>\n

He has also complained that clean energy vehicles are treated on a par with petrol vehicles, which is inconsistent with India’s climate goals.<\/p>\n

Invitations from Telangana, Maharashtra and Punjab notwithstanding, Musk’s demand for a sharp import duty cut has divided the auto industry.<\/p>\n

Domestic manufacturers such as Mahindra & Mahindra and Tata Motors, through industry lobby Society of Indian Automobile Manufacturers, have stated that a duty cut would be unfair when the government has set a high localisation threshold for Indian industry.<\/p>\n

But Musk has support from foreign carmakers who also want duty cuts.<\/p>\n

Government officials said Musk cannot demand duty reduction without committing to manufacturing in India.<\/p>\n

Musk’s problems with the government extend to Space X, which runs Starlink.<\/p>\n

The satellite broadband service provider was pulled up by the Department of Telecom (DoT) last month for offering Indian customers pre-booking opportunities.<\/p>\n

DoT put out an advisory warning subscribers that Starlink didn’t have a licence to operate, violating telecom rules.<\/p>\n

The aftermath was avoidable: Starlink’s India head and chairman of SpaceX India Sanjay Bhargava, who says he is Musk’s friend, resigned citing “personal reasons”.<\/p>\n

And at the start of this year, SpaceX had to announce that it was returning to over 5,000 customers the $99 each that they had paid for pre-booking.<\/p>\n

Telcos say Tesla got off lightly; had any other company behaved this way, government action would have been far more punitive.<\/p>\n

It is also argued that Tesla made a strategic mistake by not joining the Indian Space Association, the satellite players’ lobby that includes Sunil Mittal who runs OneWeb (Starlink’s competitor globally), to take up industry issues.<\/p>\n

Musk’s problems are not very different from those that Apple Inc confronted in its early attempts to enter India.<\/p>\n

Six years later, though, the Cupertino-headquartered giant has become something of a poster boy for foreign manufacturing in India — and it offers a lesson Musk could profitably follow.<\/p>\n

In 2016, days before Apple Inc CEO Tim Cook made his maiden visit to India, the government rejected Apple’s request for import and sale of refurbished phones.<\/p>\n

Cook had said he wanted to set up Apple Inc-owned retail stores; the government top brass also wanted him to manufacture in the country.<\/p>\n

In 2017, Apple’s demand for duty concessions (on capital equipment, components, consumables) as a condition to set up manufacturing and a relaxation on the contentious 30 per cent local sourcing condition for foreign direct investment in single-brand retail stores was rejected in Parliament by Nirmala Sitharaman, then commerce minister.<\/p>\n

Stalled, Apple Inc changed tack.<\/p>\n

Instead of running the show from the US, it put together an India team in 2018 — that included local experts who would work closely with the government and industry associations.<\/p>\n

“The logic was clear,” said a source closely associated with the subsequent discussions.<\/p>\n

“It was to align the Apple business in India with government priorities — enhance manufacturing, push the ‘Make in India’ agenda and generate employment.<\/p>\n

“So the idea was now to build a win-win model for everyone.”<\/p>\n

Queries to Apple and Tesla did not elicit a response.<\/p>\n

By dint of patience and negotiating flexibility, it took Apple Inc three years of arduous discussion and presentations to have some of the conditions for FDI in single-brand retail tweaked so that it could set up Apple-owned stores.<\/p>\n

For instance, it convinced the government to account for the manufacturing value of its contractors for determining “local sourcing” (that’s because Apple does not manufacture anything anywhere in the world).<\/p>\n

Apple also had to assure the government that it would not indulge in predatory pricing, which would impact local retailers if single- brand rules were tweaked.<\/p>\n

It was allowed to set up an online store before the physical store and committed to keeping it a platform for premium offerings, abstaining from heavy discounting practices like other e-commerce players.<\/p>\n

Even the production-linked incentive (PLI) scheme for mobile devices was signed after over 10 months of detailed negotiations and 40 to 50 meetings with different government departments.<\/p>\n

At the same time, Apple also conceded to demands of competing players even though it did not benefit from them so that the scheme was up and running for everyone.<\/p>\n

For instance, the minimum value of the phone that was eligible under the PLI scheme was pegged at $300.<\/p>\n

This was reduced to $200 as many players said it was too high and could benefit only Apple Inc.<\/p>\n

Then, the investment requirement for the PLI scheme was brought down from Rs 1,500 crore to Rs 1,000 crore to accommodate a global competitor that had made a large investment in a plant.<\/p>\n

But Apple successfully held its ground in opposing a move to credit only 50 per cent of the value of a second-hand machinery, which it would bring from China, for calculating the eligibility criterion for investment.<\/p>\n

It argued that this concession would not harm Indian manufacturing because these machines are not made in India.<\/p>\n

The other major lesson the US giant learnt was to sort out differences over government policy through negotiation rather than public statements and tweets.<\/p>\n

For instance, in the recent strike at Apple vendor Foxconn’s plant near Chennai over a food poisoning incident, the company did not criticise the government for lack of infrastructure support or the police’s failure to control unions.<\/p>\n

Instead, it apologised and put its vendor on “probation” till it sorted out its catering processes, despite the revenue losses that closure would entail.<\/p>\n

Sources said in 2020 Chinese company BYD had finalised a deal with Apple Inc to manufacture iPads in India.<\/p>\n

But with the government putting stringent conditions on Chinese investment, it decided to go only with Taiwanese contract manufacturers.<\/p>\n

When it came to lobbying for a one-year extension of the PLI scheme owing to Covid-related delays, Apple was careful to route its demands through industry lobbies — India Cellular & Electronics Association, MAIT and Ficci — rather than individually.<\/p>\n

And just like in China, where it has spawned at least a dozen billion-dollar local component companies, it is already working with the Tata group and talking to numerous others to build the component eco-system both to supply India and its global network.<\/p>\n

In short, Apple may have a useful playbook for Musk to follow if he wants to enter the Indian market.<\/p>\n

Photograph: Jason Lee\/Reuters<\/strong><\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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