Tesla restarts talks on India expansion

• Sources indicate that Tesla is looking at potential sites in Southern India and Gujarat for a gigafactory.
• The ambitious plans will include an annual production capacity of approximately half a million EVs.
• However, there are significant challenges for Tesla to overcome.

Tesla’s long-awaited entry into India has gained momentum recently, after CEO Elon Musk met Prime Minister Narendra Modi in June. So much so that local media are reporting a possible gigafactory in the country as Tesla representatives have recently met with India’s commerce minister.

Even Musk expressed his company’s keenness to establish a presence in India “as soon as humanly possible” — an indicator strong enough for the world to know that Tesla would reattempt its entry into the Indian market, this time with better government support. 

Early last year, India turned down a demand by Tesla for tax breaks to import electric cars. The Narendra Modi government wanted the US EV giant to manufacture in India as a precondition to easing duties. Tesla wasn’t happy with the requirement and eventually shelved its Indian debut.

More than a year later, local reports indicated that Tesla would likely begin operations in India with either the Model 3 or Model Y. The news came after Tesla representatives met India’s commerce minister late last month to discuss plans to build a factory to produce what the company has described as “an all-new US$24,000 car.”

Speaking with Reuters, a person with direct knowledge of the matter said that Tesla has expressed an interest in building a factory in India that would produce low-cost electric vehicles (EVs), both for the local market and for export. 

Most recently, sources have told Business Today TV that the EV giant is set on creating a significant export hub in India, with a plan to target the Asian Pacific and African markets. 

Sources indicate that Tesla is looking at potential sites in Southern India and Gujarat. “An initial proposal submitted by the company reveals ambitious plans to construct a gigafactory in India. This state-of-the-art facility is envisaged to have an annual production capacity of approximately half a million EVs,” Business Today said.

Interestingly, following reassurances from Modi himself, Tesla’s expansion will go beyond manufacturing operations. The Business Today report said Tesla aims to establish a comprehensive charging infrastructure throughout the country, addressing one of the critical concerns for the widespread adoption of EVs.

During Modi’s trip to the US in June, Musk shared that he has plans to visit India next year. “We will be able to announce something in the future. It is quite likely there will be a significant investment in India,” Musk said, adding that he had had an excellent conversation with the Prime Minister.

Musk also shared his confidence that Tesla will be in India, and that he had no plans to delay the necessary moves. 

Tesla in India means intensified competition

Given Tesla’s position as a pioneer in the EV market, the US carmaker’s entry into India will intensify the competition in the local battery electric vehicles (BEVs) market, according to GlobalData. To top it off, GlobalData reckons that by setting up a manufacturing facility, Tesla will be able to maintain price parity with other players in the mid-range EV segment.

“Tesla’s entry is expected to force current EV makers to rethink their vehicle offerings, as it offers a wide range of technologically advanced features in their cars, whereas, in India, those can only be found on high-end models. This will surely change the automotive sector, and we can see changes in technology advancement and added features in new models,” said Sumit Das, Senior Analyst at GlobalData.

Moreover, GlobalData also believes that the recent discovery of the third largest lithium-ion reservoir in Jammu and Kashmir, and Rajasthan states, amplified the necessity of establishing EV manufacturing plants for global OEMs in India. 

“Tesla is one of them, and looking at the long-term market attractiveness, setting up a manufacturing facility in India will help the company penetrate the market and leverage the Li-ion reserves,” Gorantala Sravan Kumar, Associate Project Manager at GlobalData, said.

The research firm concluded that foreign players entering the market had changed the face of the Indian market with its vast offerings in terms of features and technology. However, GlobalData believes the impact can only be seen if Tesla can place and market its product in a competitive price segment.

Tesla’s ambitious plan in India will rely on the tax or duty waivers provided. There are even talks that Musk’s hopes to set up an EV factory in India may take another significant setback – and for the same reasons. The Indian Finance Ministry is still not considering providing any tax or duty waivers to Tesla.

According to Reuters, Revenue Secretary Sanjay Malhotra said the finance ministry of India has no plans to grant any duty or tax exemptions to the American automaker.

Tesla’s entry into the Indian EV market holds great potential for the company and the country. Still, significant challenges, such as charging infrastructure and pricing, need to be dealt with.