As Tesla prepares to launch operations in India, the electric vehicle (EV) manufacturer is expected to source its initial imports from its German factory instead of other overseas locations, according to news reports. The decision comes as the company aligns with India’s evolving EV policy and investment framework.
Tesla is likely to take advantage of India’s revised EV import policy, introduced in March 2024, which permits automakers to bring in up to 8,000 vehicles annually at a reduced 15% customs duty—significantly lower than the standard 110%—provided they commit to investing at least ₹4,150 crore (approximately $500 million) in setting up a local production facility. Additionally, the policy mandates a minimum level of domestic value addition (DVA) to encourage local component manufacturing.
States Compete for Tesla’s Gigafactory
Several Indian states are aggressively vying to host Tesla’s first manufacturing facility in the country, with Gujarat, Maharashtra, Tamil Nadu, and Telangana emerging as key contenders. As per the media reports, State governments are actively working on incentive packages and infrastructure benefits to secure the investment. “There is a strong sense of urgency among state investment departments to attract Tesla’s presence,” a source familiar with the discussions reportedly stated. “Officials are keen to engage with the company at the earliest and explore potential incentives.”
Tamil Nadu and Maharashtra, already major automotive hubs, are leveraging their established ecosystems, while Gujarat’s recent success in attracting automobile investments makes it a strong competitor. Proximity to ports is seen as a crucial factor, as Tesla intends to use its Indian facility for both domestic sales and exports.
Tesla Plans $2-3 Billion Investment in India
As part of its initial proposal to the Indian government, Tesla has outlined plans to invest between $2 billion and $3 billion in a factory capable of producing 500,000 vehicles annually. A key focus of its India strategy will be the introduction of an affordable electric vehicle, expected to be priced between ₹20-25 lakh, aimed at making EVs more accessible to Indian consumers. The potential for a large-scale investment from a high-tech automaker has intensified competition among state governments.
According to the media reports, some states had already initiated preliminary discussions with Tesla last year when the company was first considering an India entry. With negotiations now in advanced stages, talks are expected to include key logistical aspects such as rail connectivity to ports to facilitate exports.
Tesla’s Expansion Strategy in India
Tesla is reportedly aligning with India’s vision of reducing reliance on certain import markets, reinforcing its long-term commitment to local manufacturing. The Berlin-based Gigafactory, which currently produces the Tesla Model Y, is expected to manufacture right-hand drive vehicles suited for the Indian market.
The company’s India entry will likely begin with vehicle imports before gradually transitioning to full-scale domestic production. As Tesla finalizes its plans, industry observers are closely watching for an official announcement on the location of its much-anticipated Indian gigafactory.
