A new report states that Tesla has proposed to build a factory in India during a meeting with officials today. After years of negotiation in the world’s most populous country, it would mark a reversal of its strategy.
India has the biggest auto market that Tesla has yet to enter.
For years, Elon Musk said that Tesla’s launch in India was imminent, but strong import tariffs have made it difficult. Nonetheless, the automaker has had some indications of preparing for a launch over the last year.
In 2021, Tesla officially incorporated an Indian company in Bengaluru, the capital of India’s southern Karnataka state. During the summer, Indian government officials said that they are considering Tesla’s proposal to greatly reduce import duties for electric cars, which has been the main hurdle for the company to enter the market.
The government has maintained high import duties on EVs to encourage local production, but so far, it has mainly resulted in preventing automakers to import popular EVs produced outside the country, including in China.
Tesla has expressed interest in building a factory in the country, but as it has done in every other market, the automaker prefers to first test the waters with imported vehicles.
In 2021, Tesla vehicles have been spotted being tested on Indian roads (pictured above), and it got seven electric vehicle variants approved in the country.
However, the company wasn’t able to come to a deal on import tariffs, and in 2022, Tesla decided to put its plans to enter the Indian market on hold.
Over the last few days, there were local reports in India that Tesla sent executives in the country to meet with officials.
Now Reuters that Tesla has proposed a new factory in India:
Tesla Inc has proposed setting up a factory in India to build electric cars for domestic sale and export, the carmaker told government officials on Wednesday, according to a source with direct knowledge of the matter.
Top comment by Carmayogi
As an Indian who worked in the Indian auto industry for 10 yrs, I can say that this is a smart move but a difficult one. I trust Tesla will be able to manage. Ford, GM both quit the market because they could not compete with India's cutthroat pricing. It is, after all, a market that has THREE entire size-classes of vehicles below a VW Golf. We do small and we do cheap really really well.
The good news is that India has a huge supplier base for raw materials and parts and also has a huge labor pool of skilled auto workers. Companies like Hyundai have made India an export hub and this strategy has worked well. Hyundai went from nobody to #2 in India (behind Suzuki) within a decade.
Tesla should invest in India and should ideally make India an RHD production hub for markets like Thailand, Australia, Japan, UK, South Africa to name a few, along with its own domestic market. Furthermore, with CCS2, Tesla can be the first to launch a truly high speed charging network in the country. Typical highway avg speeds are lower in India with warmer temperatures, so it's a great place for efficient EV driving.
Finally, auto sales volumes in India above $25000 fall off a cliff. A majority of sales are between $12500-$25000. Launching the India factory with a $25k car would be a huge win.
This would mark a change in strategy with starting sales in a market by first establishing production.
Electrek’s Take
It makes sense that Tesla would give up on that at some point. India is just too big of a market not to participate.
In lieu of important cars in the country, I am sure Tesla did its homework over the last year to make sure it can efficiently enter the market with its own factory first.
It also makes sense with cheaper Tesla vehicles coming. If Tesla builds a factory in India, it will start by producing its new “$25,000 Tesla” built on its next-generation platform that requires much lower capital expenditure to deploy.
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