Tesla Inc. announced on June 2 that they have decided against setting up manufacturing operations in India despite efforts by the Indian government to attract foreign EV manufacturers through an incentive scheme. Union Minister for Heavy Industries H.D. Kumaraswamy disclosed this news, noting that Tesla only wants showrooms open so as to sell imported vehicles; not for local production facilities to be set up locally.
hindustantimes.com or timesofindia.indiatimes.com were available as sources.
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The Indian government recently unveiled a policy designed to facilitate domestic EV manufacturing. Under this scheme, foreign automakers investing at least $486 million (approximately Rs4,150 crore) within three years in local production can qualify for reduced import duties of just 15% on limited numbers of electric vehicles, down from current rates of 70%. Furthermore, manufacturers must meet local content requirements by meeting 25% domestic value addition within three years and 50% by year five (Wsj.com and Reuter’s reports respectively). (Sources for these reports are: Wsj.com + 8), Reuter’s + 8 and Indiatoday.in for details).
Policy was widely seen as an attempt to convince Tesla to set up manufacturing in India following CEO Elon Musk’s criticisms of India’s high import tariffs – described by him as some of the highest globally. But Minister Kumaraswamy made clear that Tesla has not expressed an interest in manufacturing here and instead is focused on opening sales outlets instead. [Sources for additional coverage include]: (reuters.com], IndiaToday.in (+1), NDTv (+1), EconomicTimes India Times India Time etc]. Timesofindia Times Of India Times of India Times of India Times Of India Times of India Times of India Times OF INDIA TIMES + 3 and Timesofindia@economictimesindiatimes com).
Though Tesla remains reticent to enter India’s EV market, other global automotive giants are showing great enthusiasm. Companies like Mercedes-Benz, Volkswagen-Skoda, Hyundai and Kia have expressed interest in participating in India’s government incentive scheme by opening manufacturing units there and the application window should open shortly to solicit formal proposals from interested automakers. IndiaToday.in: [+1], EconomicTimes: (+1), IndianExpress: (1+2) and TheWire (+1); as well as Economictimes India Times India Times [+3], indianexpress: 1 +3, EconomicTimes India Times India Times IndiaTimes +3 and Economictimes IndiaTimes +3 IndiaToday.in].
Domestic manufacturers like Tata Motors and Mahindra & Mahindra who have invested significantly in local EV production have expressed concerns over reduced import duties for foreign players, saying this would harm domestic companies that have pledged themselves to the “Make in India” initiative. Economic Times.com +2 Reuter’s.com.in +2 * IndiaToday.in.
India’s electric vehicle market remains in its early stages, accounting for just 2.5% of car sales in 2024. To meet broader goals of reducing carbon emissions and decreasing dependence on fossil fuels, government plans aim to raise this share to 30% by 2030 (Reuters.com/+1 and Indiatoday.in respectively).
Tesla’s decision to restrict itself solely to retail showrooms could hinder its ability to effectively compete in India given price-sensitive consumers and increasing competition from both domestic and international EV makers. As the Indian EV landscape changes, industry stakeholders and potential customers alike will closely scrutinise Tesla’s strategic choices in this country.
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