Elon Musk-owned Tesla‘s long-awaited plan for India’s debut appears to be gaining momentum after a considerable delay. The company is reportedly planning to establish a massive factory in India, capable of producing 500,000 electric vehicle (EV) units annually. According to media reports, the price of Tesla cars in India could start as low as Rs 20 lakh (~$24,356). 

This electrifying development comes hot on the heels of a meeting between Elon Musk and India’s Prime Minister, Narendra Modi, during the latter’s recent visit to the United States. Modi’s charm and enthusiasm seemed to have a lasting impact on Musk, as he now appears more determined than ever to make a splash in the Indian market. 

To pave the way for this ambitious venture, Tesla has been in deep discussions with the Indian government. They’re exploring possibilities of bringing their auto parts and electronics chain to India, while also seeking incentives and tax breaks. 

India’s Ministry of Commerce and Industry is leading these crucial talks, aiming to strike a fair deal that benefits both sides and maintains a level playing field. 

What’s even more interesting is Tesla’s long-term vision for India. Once Tesla establishes its stronghold in India, the company has set its sights on turning the country into a formidable export hub for the Indo-Pacific region. That’s right – Indian-made Tesla cars could soon be cruising the roads of neighbouring countries, showcasing the nation’s prowess in the EV industry. 

Insiders, speaking in hushed tones, revealed that Tesla’s audacious plan has generated a wave of optimism. They firmly believe that this time, Tesla’s Indian dream will become a reality, thanks to the inclusion of local manufacturing and exports. It’s an exciting prospect that promises to boost India’s economy while placing Tesla firmly in the driver’s seat. 

As the news broke, Indian media wasted no time reaching out to Tesla for a comment, but the company’s response remained elusive. 

Tesla Eyes Indian Market: 2017-2023 

The road to Tesla’s Indian adventure hasn’t been smooth. The company has been eyeing India since 2017 but has faced numerous obstacles along the way. One of the main challenges has been the heavy import duty imposed by the Indian government, coupled with their preference for local manufacturing over imports. Despite initial discussions and visits, Tesla has struggled to make significant progress in India. 

In 2015, Prime Minister Narendra Modi visited Tesla’s factory in California, expressing his desire to establish a manufacturing plant in India. However, Tesla ultimately decided to build a factory in Shanghai, China, which became operational in 2020 with the production of the Model 3 sedan. 

In 2018, Elon Musk once again expressed his interest in entering the Indian market, but government regulations and challenging conditions forced him to put those plans on hold. Musk cited the tough government regulations as a significant hurdle in bringing Tesla to India. 

In 2020, Tesla initiated discussions with government officials of Karnataka to open a research and development facility in Bengaluru. 

In January 2021, Tesla finally made some headway by registering as a company, “Tesla Motors India Private Limited,” in Bengaluru. This move indicated renewed efforts to navigate the Indian market. 

In July 2021, a well-known YouTuber approached Elon Musk and inquired about the estimated time of arrival for Tesla cars in India. Musk’s response shed light on the challenges the company has faced. He expressed his desire to bring Tesla to India but cited the heavy import duties as a major hindrance to their debut in the country. According to Musk’s tweet, India imposes the highest import duties on imported cars among large countries worldwide. He also voiced his dissatisfaction with India’s treatment of clean energy vehicles, which are treated similarly to conventional diesel or petrol cars, contradicting climate goals. 

Tesla has actively been lobbying for import duty exemptions in India, but their efforts have not yet yielded any success. If India were to accommodate Musk’s demands, it would require eliminating the import duties of 60% on EVs costing $40,000 or less and 100% on cars with CIF (Cost, Insurance, and Freight) prices above that threshold. Since Tesla’s pricing falls within the 100% import duty bracket, it becomes challenging for the company to manufacture and sell cars in India at a competitive price point. 

However, it seems that both Tesla and the Indian government are ready to find common ground and embark on a mutually beneficial journey. 

In 2022, Tesla abandoned its plans due to a failure to obtain special incentives from the government for importing vehicles at lower duties. The Modi government has maintained its stance that Tesla must manufacture vehicles locally instead of importing them, particularly from China. 

According to a senior government source cited by the Economic Times, Tesla has not yet applied for benefits under the Production-Linked Incentive (PLI) schemes offered by the Indian government. The source mentioned that while Tesla could potentially avail benefits for manufacturing advanced chemistry cells, the company is seeking concessional duties without demonstrating a commitment to local production. 

For those who are unaware, India has implemented various government schemes, including the PLI scheme, to incentivize automotive and parts manufacturers to establish local production using domestic resources and talent. These schemes aim to support all stakeholders and discourage outsourcing domestic jobs to foreign countries for cost-saving purposes. As of 2022, around twenty companies, including Hyundai Motor India, Suzuki Motor Gujarat, and Mahindra & Mahindra, have already submitted investment proposals under the PLI scheme. 

Tesla’s dialogue with the Indian government resumed in May 2023 when a team from the company visited India. Early this month, in June 2023, Elon Musk met PM Modi in the US. During this meeting, Musk openly expressed his admiration for Modi and revealed that their discussion had further inspired him to increase Tesla’s investments in India. This positive interaction between Musk and the Prime Minister signifies a renewed commitment from Tesla towards the Indian market.