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Tesla to Scout Location in India for Manufacturing Plant, Team to Visit in April

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Elon Musk-owned Tesla Inc., a prominent manufacturer of Electric Vehicles (EVs) based in the US, plans to set up its manufacturing plant in India. Tesla’s EV factory in India would entail an investment of about USD 2-3 billion (approximately Rs. 16,600 crore to Rs. 25,000 crore).

Haryana, Maharashtra, Gujarat & Tamil Nadu Probable States for Tesla Factory

As per a report by UK’s Financial Times dated 3rd April 2024, a team from Tesla Motors will visit India in late April to scout probable locations for the company’s EV plant. The report added that states with existing automotive manufacturing centres are likely to be preferred for Tesla’s investment. In this regard, Financial Times cited two sources, one of which mentioned the possibility of regions around National Capital Region (NCR) in Haryana, while the other mentioned Maharashtra, Gujarat and Tamil Nadu as potential states for Tesla’s investment on account of their ports.

It must be noted that there has been no official statement from Tesla in this regard.

Tesla’s anticipated manufacturing plant in India will produce EVs for sale in Indian markets and for export to parts of South Asia, Gulf, Africa, and southern & eastern parts of Europe.

Tesla’s Entry in Indian EV Market “Natural Progression” – Elon Musk

During an interaction with Mr. Nicolai Tangen, CEO of Norges Bank Investment Management, Tesla CEO, Mr. Elon Musk mentioned that Tesla’s entry into India and availability of Tesla EVs in the Indian market will be “natural progression” . Several media portals have taken it as a hint of confirmation for Tesla’s entry in India, especially since Mr. Musk’s remark has come only a few days after the aforementioned report by Financial Times.

Moreover, some media reports claim that the state governments of Gujarat and Maharashtra have made Tesla “attractive land offers for the construction of an EV manufacturing facility”.

Customs Duty Slash on Imported EVs Strengthen Chances of Tesla’s Entry in India

Chances of Tesla’s probable entry into India have gained wind since the reduction of customs duty on imported EVs. The Union Government slashed import duty on EVs in March 2024 to 15% from the earlier 100%. This reduction in duty is applicable for the import of a maximum of 40,000 vehicles (maximum 8,000 vehicles per year for 5 years), each valued at USD 35,000 or more.

This reduction in duty is applicable only for companies which commit a minimum investment of USD 500 million (about Rs. 4,150 crore) in India to set up their manufacturing facility in a period of 3 years. As per this policy, Tesla will be required to start production of EVs in India and attain at least 25% Domestic Value Addition (DVA) within 3 years and minimum 50% DVA within 5 years.

4-Wheeler EV Penetration in India Still Nascent, Tesla’s Entry Potential Game Changer

As per a June 2023 report by Statista, penetration rate of electric 4-wheelers in India was about 1% as of FY-23. The report estimates that this figure will grow to about 5% by FY-27 and further to approximately 15% by FY-30.

Currently, the major 4-wheeler EV players in India include names such as Tata Motors, KIA, Mahindra, MG Motor India, and a few others. Entry of international giants such as Tesla in India would not only bring in more FDI, but also encourage competition among EV manufacturers in the market. Tesla already has an elaborate EV portfolio, and along with its brand value, it has the potential to significantly push the Indian buyer towards 4-wheeler EVs.

About Tesla Inc.: Texas-based Tesla Inc. is an automotive company engaged in the manufacturing of Electric Vehicles, Battery Energy Storage Systems, solar panels and related products. Tesla has six manufacturing facilities, four of which are in the US, one is in Shanghai and one factory is located in Berlin.