A Tesla team is set to visit India this month to scout locations for a car manufacturing plant, with an estimated investment of around USD 2 billion, according to two sources who wished to remain anonymous as the plans are not yet public.
Tesla has initiated the production of right-hand drive vehicles at its German facility, targeting exports to India later this year, as per three individuals familiar with the matter. This move signals Tesla’s potential entry into India, the world’s third-largest automotive market.
A Tesla delegation is anticipated to visit India this month to evaluate potential locations for a domestic car manufacturing plant, which is projected to necessitate an investment of approximately USD 2 billion. This information comes from two of the aforementioned individuals, who requested anonymity due to the confidentiality of the plans. Last month, India significantly reduced the import tax on certain electric vehicles, provided their manufacturers invest at least USD 500 million in the country and commence production within three years. This policy change benefits Tesla, which has been advocating for lower taxes despite opposition from local automakers.
According to a source, the right-hand drive cars designated for India have begun production, with some vehicles anticipated to be shipped to India by the end of the year. Although it is not immediately clear which Tesla model will be exported to India, the Berlin factory currently only manufactures the Model Y.
Under the new Indian policy, companies can import up to 8,000 cars annually at a reduced tax rate. Tesla has yet to respond to inquiries for comments outside of U.S. office hours.
This development marks the first instance of right-hand drive vehicles being produced in Berlin for Tesla. Previously, the Shanghai plant, situated closer to right-hand-drive markets such as Australia and Japan, handled the production of such vehicles. Tesla imported right-hand drive Model Y vehicles from China for its UK launch and has not disclosed whether it has transitioned to importing from Berlin.
Tesla has been exploring the Indian market for several years, with company officials visiting the country multiple times over the past year. CEO Elon Musk also met with Indian Prime Minister Narendra Modi in New York last June.
Tesla’s entry into India comes at a time when electric vehicle demand in its primary markets, the U.S. and China, is slowing, and competition from Chinese manufacturers is intensifying. This has led to a decline in Tesla’s first-quarter deliveries, falling short of expectations.
Tesla’s plans for India include investments in a charging network, in addition to the USD 2 billion earmarked for the manufacturing plant, and increased local sourcing of components. Tesla already imports parts from India and is now looking at reducing sourcing from China and making India a bigger sourcing hub.
Tesla is considering the southern state of Tamil Nadu, Maharashtra in the west, and Modi’s home state of Gujarat for its factory, which it aims to construct within two years, according to two sources.
India’s electric vehicle market, though small, is expanding. It is currently dominated by domestic automaker Tata Motors, with electric models accounting for 2% of total car sales in 2023. The government has set a target for electric vehicles to make up 30% of total car sales by 2030.
In January, Tesla’s Vietnamese competitor VinFast announced a USD 2 billion investment in India and commenced construction of an electric vehicle factory in Tamil Nadu.
