India is on the verge of striking a deal with Tesla, allowing the American company to bring its electric cars into the country next year and set up a factory within two years, as per a Bloomberg report. The potential announcement is anticipated at the Vibrant Gujarat Global Summit in January, with Gujarat, Maharashtra, and Tamil Nadu under consideration due to their established electric vehicle ecosystems.
Tesla is reportedly eyeing an initial investment of about $2 billion for the plant, intending to boost auto parts purchases from India to $15 billion. The company also plans to produce some batteries locally to trim costs. Entering the Indian market, where the demand for electric vehicles is on the rise, could be a strategic move for Tesla. However, it’s worth noting that India’s electric vehicle market is still in the early stages, representing only 1.3% of total passenger vehicle sales last year.
Due to high tariffs, Tesla presently doesn’t directly import cars to India. However, locally manufactured cars could potentially be offered at a more accessible price point, around $20,000. Trade Minister Piyush Goyal, following a visit to Tesla’s plant, shared that the company has intentions to double its auto parts purchases from India, reaching $1.9 billion this year.
While talks between Tesla and India recommenced in May after a yearlong standoff, a final decision is yet to be reached. India is contemplating reducing import taxes for international EV manufacturers for five years if they commit to establishing local factories. Elon Musk, Tesla’s CEO, has conveyed plans for a “significant investment” in India, with a possible visit in 2024.
The move also aligns with India’s push for electric mobility and could position Tesla advantageously in a market with substantial growth potential. However, challenges such as the nascent state of the electric vehicle market in India and regulatory considerations remain integral to the success of this ambitious venture.