Elon Musk’s Tesla appears to have little interest in manufacturing vehicles in India, despite the country’s efforts to entice global automakers with a new electric vehicle (EV) policy. Heavy Industries Minister Kumarswamy stated on Monday that Tesla’s focus remains on opening showrooms and selling imported cars in India rather than establishing local production facilities. This suggests that the EV giant is unlikely to begin manufacturing in the country anytime soon.
Minister Kumarswamy also announced that India will soon invite applications under its electric vehicle manufacturing policy. He noted that prominent companies, including Mercedes Benz, Skoda-Volkswagen, Hyundai, and Kia, are eager to set up EV manufacturing operations in India. He indicated that the application process for the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) will start shortly, allowing the government to accept formal applications for EV production.
The Indian government’s updated scheme includes significant tax incentives for foreign automakers willing to invest in local production. Specifically, companies that commit to investing around $486 million in building electric vehicles will benefit from a reduced import duty of 15% on a limited number of electric cars, a substantial decrease from the current 70% duty.
Awareness of Tesla’s plans increased recently when former U.S. President Donald Trump commented that any intentions Tesla may have to open a factory in India would be “very unfair.” While Tesla has initiated the process of establishing showrooms and recently posted job listings in the country, Musk has voiced concerns over India’s high import duties, calling them a considerable hurdle for Tesla’s expansion.
Tesla’s potential gigafactories in India could significantly impact the country’s manufacturing and technology sectors by producing EVs, batteries, and charging solutions locally. However, challenges remain. The company’s direct sales model may need to be adjusted to fit India’s traditional dealership-centric market. Moreover, robust aftersales service is crucial for success in the Indian market, which is known for its pricing sensitivity.
Currently, the bulk of the Indian passenger vehicle market remains below Rs 20 lakh, with the cheapest Model 3 priced at $42,490 in the U.S. (approximately Rs 37 lakh), positioning it as a luxury vehicle in India even before additional customs duties are applied. Any initial imports from Germany would only add to the cost, further complicating Tesla’s pricing strategy unless external pressures lead to a reduction in tariffs.
Rajeev Chaba, CEO emeritus of JSW MG Motor India, emphasized that pricing would present a significant challenge for Tesla. Musk has hinted at introducing more affordable models, suggesting a potential $24,000 vehicle, colloquially known as Model 2. However, this rumored model may not materialize, particularly as reports indicate that Tesla is prioritizing a cheaper version of the Model Y to boost demand in China.
For Tesla to establish a meaningful presence in India, it will need to offer better pricing and value-driven products than its competition in China. Despite electric passenger vehicle sales currently accounting for less than 3% of total sales, the market is showing substantial growth, skyrocketing from 5,000 units in 2020 to over 113,000 units in 2024. This trend presents a viable opportunity for Tesla, particularly in the premium segment, as potential customers increasingly seek diverse options in the evolving EV landscape.
While interest in electric vehicles continues to surge in India, Tesla faces a complex path ahead as it navigates pricing, production hurdles, and distribution models in this promising yet challenging market.
Original Source: https://m.economictimes.com/industry/auto/auto-news/tesla-unlikely-to-manufacture-in-india-soon-minister-says/articleshow/121565259.cms
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Publish Date: 2025-06-02 14:12:00
