Tesla is expected to import cars from its German factory instead of shipping them from China, in response to concerns raised by the Indian government. As it prepares to enter the Indian market—initially via imports and later through local manufacturing—the electric carmaker is being courted by several state governments to establish a manufacturing facility. Gujarat, Maharashtra, Tamil Nadu, and Telangana are emerging as the leading contenders.
Sources indicate that Tesla is “highly likely” to apply for benefits under the new EV policy announced by the government in March 2024. This policy would allow the company to import up to 8,000 cars annually at a reduced 15% customs duty (compared to the current 110%), provided Tesla commits to investing approximately Rs 4,150 crore (about $500 million) in a local factory and adheres to additional domestic value addition (DVA) requirements.
“There is a mix of excitement and nervousness in the investment departments of key states as they race to attract Tesla’s investments. The goal is to approach Tesla’s management promptly and begin negotiations, offering special incentives,” said a source.
Tamil Nadu, Maharashtra, and Gujarat, which are established automobile manufacturing hubs, are seen as frontrunners due to their proximity to ports—an essential factor for Tesla’s India facility, which is expected to also serve as an export hub.
In its initial proposal to the government, Tesla outlined plans for a plant with an annual capacity of 500,000 units, with an investment between $2 billion and $3 billion. The company intends to develop a new budget car tailored for India, likely priced between Rs 20-25 lakh.
The potential for a significant investment from such a high-tech company has attracted strong interest from various states. “Some states have already begun discussions with Tesla’s management, starting last year when the company seemed poised to enter India. Those talks will now progress to a more advanced stage, with more focused attention on the company’s needs, including rail connectivity to the port,” another source said.
Regarding the government’s request to avoid imports from China, one source noted that Tesla “seems aligned” with this request, given the diplomatic tensions between India and China. Tesla’s German factory in Berlin, which produces the Model Y, will now manufacture right-hand drive vehicles for the Indian market.
