Tesla won't manufacture in India, will sell imported EVs only
What's the story
Tesla has no plans to manufacture vehicles in India, according to Heavy Industries Minister HD Kumaraswamy.
The minister's statement comes amid expectations from some quarters for the electric vehicle (EV) giant to set up production facilities in the country.
Instead, Kumaraswamy said that "Tesla only wants to open showrooms and sell imported cars."
The EV giant likely won't be producing vehicles in the country anytime soon, he added.
Policy details
India's EV manufacturing policy and global interest
Kumaraswamy also announced that India will soon start inviting applications under its new EV manufacturing policy.
The minister revealed that global automakers like Mercedes-Benz, SKODA-Volkswagen, Hyundai, and Kia have shown interest in setting up EV production units in India.
He said the application window for the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) will open soon.
Incentives
Government's scheme to boost EV manufacturing
The Indian government has launched a scheme offering major import duty reductions for foreign automakers willing to invest in local EV production.
Under this revised scheme, companies can import a limited number of electric cars at a reduced import duty of 15%, instead of the current 70%.
This benefit applies if they commit to investing $486 million in building EVs in India.
Market entry
Tesla's India entry plans and challenges
Despite securing some showroom space in India and posting over two dozen jobs, Tesla has not committed to manufacturing in the Indian market.
The company has been considering entering the country for several years. However, Musk has often criticized India's high import duties as a major hurdle for Tesla's expansion.
The automaker's gigafactories could have boosted India's manufacturing and tech sectors by producing EVs, batteries, and charging solutions locally.
Market hurdles
Pricing and market challenges for Tesla in India
Tesla's direct sales model may need adjustments for India's dealer-centric market.
The company's cheapest Model 3 retails at $42,490 (around ₹37 lakh) in the US, which would put it firmly in the luxury segment in India.
Initially, these cars will likely be imported from Germany, adding a similar amount to the sticker price in duties.
Future prospects
Company's future plans and India's EV market growth
Musk had hinted at launching more affordable models in early 2025.
However, if Tesla wants to have a significant presence in India, it would need better pricing and value-driven offerings than even China.
Despite low EV penetration (less than 3% of total sales), India's electric passenger vehicle sales have grown from 5,000 units in 2020 to over 113,000 in 2024.
Tesla could leverage this momentum, particularly in the premium segment.