New Delhi: The government on Tuesday clarified that Tesla Inc. does not have to source components needed to build its car from the local market if the US-based firm plans to set up a manufacturing base in India.

Responding through the official Make in India Twitter handle, the government said that under current foreign direct investment rules, such restrictions apply only to retail trading of goods.

“These, however, are not applicable to manufacturers as goods are made in India," it said. “After manufacturing in India, a foreign investor is permitted to sell its products in any manner—wholesale, retail or e-commerce," the government said, adding that it also permits wholesale trade of imported goods in India without sourcing conditions.

Elon Musk created quite a furore on Monday when he tweeted, “Maybe I’m misinformed, but I was told that 30% of parts must be locally sourced and the supply doesn’t yet exist in India to support that".

An email sent to Tesla’s government affairs and legal department seeking clarifications on Monday remained unanswered at the time of going to press.

Currently, many companies, mostly premium auto makers such as Ferrari, Porshe and Lamborghini, sell their products in India through various retail channels. The law states that any fully built unit of automobile that is imported to India and costs more than $40,000 is mandated to pay 100% customs duty; the duty is 60% for vehicles that cost less than $40,000.

Tesla’s much anticipated Model 3, positioned as a mass-market, affordable car, will retail at $35,000 in the US. Some Indians have also booked it by paying an advance of $1,000.

In February, Musk said that the company is likely to introduce its products in India sometime in the summer of 2017.

The National Democratic Alliance government has been trying to woo Tesla to make India a manufacturing hub for exports to south and south-east Asian countries. Mint on 24 March reported that transport minister Nitin Gadkari offered land near ports to Tesla so that the company could set up a manufacturing unit in the country and also make it an export base. Tesla, however, has not responded to these overtures.

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