India is reportedly on the verge of finalizing a deal with Tesla, enabling the American automaker to commence electric car shipments to the country by next year. The agreement, poised for a potential announcement at the Vibrant Gujarat Global Summit in January, may also include plans for Tesla to establish a manufacturing facility within two years. States like Gujarat, Maharashtra, and Tamil Nadu are under consideration due to their well-established ecosystems for electric vehicles and exports.
Tesla prepared to commit initial minimum investment:
Sources suggest that Tesla is prepared to commit an initial minimum investment of approximately $2 billion for the plant, with plans to boost purchases of auto parts from India to as much as $15 billion. Additionally, the company aims to produce batteries locally to reduce costs. While no final decision has been reached and plans could evolve, Tesla’s CEO, Elon Musk, previously indicated the company’s intention to make a “significant investment” in India, planning a visit in 2024.
Despite India’s efforts to bolster domestic EV manufacturing and promote cleaner transport, the country’s electric vehicle market remains relatively modest, constituting just 1.3 percent of total passenger vehicle sales last year. High upfront costs and a lack of charging infrastructure contribute to consumer hesitancy.
Tesla refrained from direct car imports into India:
Tesla, which currently has factories in the US, China, and Germany, has refrained from direct car imports into India due to steep tariffs. However, locally manufactured Tesla cars, once available, could potentially retail for as low as $20,000. Trade Minister Piyush Goyal, who visited Tesla’s California plant, revealed plans for Tesla to nearly double its purchases of auto parts from India to $1.9 billion this year.
Negotiations marked by Musk’s criticism of India’s high import taxes:
The reopening of dialogues between Tesla and India in May, following a year-long impasse, signals a potential breakthrough. The negotiations have been marked by Elon Musk’s criticism of India’s high import taxes and EV policies, while India has advised against selling cars made in China, its political rival. As part of the ongoing discussions, India is contemplating reducing import taxes for international EV manufacturers for a five-year period, contingent on their commitment to establishing local manufacturing facilities.