The US EV maker Tesla (TSLA.O) has begun discussions with the Indian government for an investment proposal to set up a car factory in the country, with an annual capacity of 500,000 electric vehicles. Prices for the vehicles will start from 2 million rupees ($24,400.66), the Times of India reported on Thursday, citing sources. The billionaire Elon Musk-led company is also considering using India as an export base, with plans to ship cars to countries in the Indo-Pacific region from the plant. It has already been supplying steering wheel components for its vehicles to local manufacturers.
The move by the US-based EV manufacturer marks a turnaround in its plans for India, where it had earlier expressed interest in entering but later withdrew after deciding that its expensive cars would be unaffordable for most Indian consumers. Its renewed efforts come weeks after Musk met with Prime Minister Narendra Modi in the United States, a high-profile visit that saw the PM push for Tesla to invest in the country.
Building cars in the country will align with Modi’s pitch to attract foreign companies with his “Made in India” campaign and help reduce Tesla’s dependence on China, where most car manufacturers have their plants. Experts say it will also allow the company to rely on new domestic suppliers for relatively less complex parts. They added that the company will still be keen to utilize its technology for critical parts for safety.
Sources told ET that representatives from Tesla US and Tesla India held meetings with senior Indian officials and ministers this week. They asked about the structure of incentives for car and battery manufacturing in India, which is expected to be a key factor when evaluating the project.
Earlier, a questionnaire sent to the company by ET still needed to be answered. The latest development comes a month ahead of the planned visit by Modi to the US and follows Musk’s meeting with the PM during the latter’s high-profile trip to the United States last month. The two men spoke about the importance of building a future for sustainable energy and discussed expanding Tesla’s and SpaceX’s presence in the country.
India is one of the world’s fastest-growing markets for electric vehicles, with the potential to grow to become the third-largest market for electric vehicles by 2025. Last year, the government began offering a range of incentives to encourage companies to manufacture electric cars in the country. These include tax rebates and exemptions from customs duties. The incentive package is designed to promote electric vehicle production in the country and boost India’s status as a global hub for the industry. The current incentive packages will run through the end of 2022. However, the government may extend them for another two years if necessary. During the initial phase, which ended in January, the government received applications from more than 100 international and domestic car makers to build electric vehicles in India.