Tesla To Be Made In India? Automaker Proposes To Set Up Manufacturing Plant In The Country

As part of its renewed focus on India and efforts to reduce its dependence on China for manufacturing, global automotive giant Tesla has reportedly proposed setting up a factory in the country to build electric cars for domestic sale and export. 

Tesla executives put forward the proposal during a meeting with the officials from the Indian government on Wednesday (May 17), Reuters reported citing sources. Officials from the Prime Minister’s Office and other ministries were present during the meeting.

However, the US-based company did not bring up the issue of lowering import taxes on its cars during the meeting, the report said.

Elon Musk-led Tesla’s U-turn comes a year after the carmaker put its India expansion plans on hold as the government refused to heed its demand of lowering import taxes on its cars. India currently imposes as much as 100% import tax on automobiles that are completely imported.

Following the Centre’s refusal to cut import duty, Tesla CEO Musk said in May last year, “Tesla will not put a manufacturing plant in any location where we are not allowed first to sell and service cars.” 

Prior to that, the EV carmaker had big plans for India and aimed to launch its electric cars in the country by 2022. It also planned to set up an electric car manufacturing facility in Karnataka. 

However, the disagreement over tax rates led to Tesla shelving its plans. The Centre was concerned that lowering the tax rate would discourage other local and global automotive companies which manufacture their vehicles in India.

Meanwhile, the government continued its ‘Make In India’ push and said Tesla should manufacture vehicles in India. After Musk’s announcement that it won’t set up a manufacturing plant in the country, Union Minister Nitin Gadkari said last year that Tesla was welcomed in the country only if the company manufactured its electric automobiles domestically.

“Elon Musk is welcome in India. However, it will not be possible if he only manufactures in China and wants a concession for marketing in India,” Gadkari said.

While the Indian government has an ambitious goal of electric vehicles having 30% share in private cars, 70% in commercial vehicles, and 80% in electric two- and three-wheelers by 2030, the adoption numbers across categories are abysmally low as of now.

As of March 6, 2023, a total of 21.7 Lakh EVs ran on Indian roads, which was a mere 0.6% of the total number of vehicles that stood at 33.8 Cr. While electric two- and three-wheeler vehicles are witnessing increasing demand, the growth has been slower in the electric cars segment. 

Meanwhile, Tesla setting up a manufacturing plant in India will provide further impetus to the government’s initiative to woo global companies to manufacture in the country. With suppliers of tech major Apple already increasing their production capacities in India, Tesla setting up a plant in the country would further strengthen the government’s claims of India being an attractive manufacturing destination.