Tesla in India: Elon Musk’s EV company set to sign deal to start importing cars, set up $2bn factory

It seems that Tesla is set to enter the Indian market in 2024, first through imported cars and then later selling India-made Teslas.

India is reportedly on the verge of finalizing an agreement with Tesla Inc. that would permit the Elon Musk-led automaker to import its electric cars to the country starting next year and potentially establish a manufacturing facility within the next two years, according to a report by Bloomberg, which cites sources familiar with the Indian government’s discussions with Tesla’s Indian team.

The announcement of this potential deal is anticipated to be made during the Vibrant Gujarat Global Summit in January, insiders say.

Gujarat, Maharashtra, and Tamil Nadu are being considered as potential locations for the Tesla manufacturing plant due to their established ecosystems for electric vehicles and export capabilities.

As part of the agreement, Tesla is expected to commit an initial minimum investment of approximately $2 billion for the manufacturing plant. Additionally, the company aims to increase its purchases of auto parts from India, potentially reaching up to $15 billion. To reduce costs, Tesla may also explore the possibility of manufacturing some batteries in India.

While no final decision has been reached, and plans could undergo changes, the potential deal represents a significant development in Tesla’s expansion strategy. Elon Musk, CEO of Tesla, had previously expressed the company’s intent to make a “significant investment” in India, with plans to visit the country in 2024.

The move to enter the Indian market aligns with Tesla’s global strategy and comes as India, led by Prime Minister Narendra Modi’s government, seeks to boost domestic manufacturing of electric vehicles and encourage the widespread adoption of cleaner transportation. Despite India’s efforts, the electric vehicle market in the country has faced challenges, accounting for only 1.3 per cent of total passenger vehicles sold last year.

Tesla’s entry into India could prove to be a significant boost for the company, as it taps into the growing demand for electric vehicles among the country’s aspirational middle-class consumers. To date, Tesla has manufacturing facilities in the United States, China, and Germany.

The negotiation process has not been without its hurdles, with Tesla facing high import tariffs that have deterred direct imports into India. However, if the deal goes through, locally manufactured Tesla cars could potentially be priced as low as $20,000, making them more accessible to the Indian market.

Minister Piyush Goyal, who recently visited Tesla’s plant in Fremont, California, indicated in September that Tesla plans to nearly double its purchases of auto parts from India to $1.9 billion this year, a significant increase from the $1 billion worth of parts sourced from the country in the previous year.

While Tesla and India had faced challenges and disagreements, including criticism from Musk on India’s import taxes and EV policies, the recent dialogues suggest a willingness to find common ground. India is reportedly considering reducing import taxes for international EV manufacturers for a period of five years if they commit to establishing local manufacturing facilities.