India is reportedly nearing an agreement with Tesla that would permit the U.S. automaker to export its electric vehicles (EVs) to the country from next year and establish a factory within two years.
The deal, expected to be unveiled at the Vibrant Gujarat Global Summit in January, involves an initial investment of around $2 billion, potential part purchases of up to $15 billion, and plans for battery production in India. The states of Gujarat, Maharashtra, and Tamil Nadu are under consideration for the factory due to their established ecosystems for EVs and exports.
Tesla aims to make some batteries in India to reduce costs, in addition to increasing its purchases of auto parts from the country. However, no final decision has been made, and plans could change. Elon Musk, CEO of Tesla, mentioned in June that the company plans to make a “significant investment” in India and intends to visit in 2024.
India’s push for domestic EV manufacturing aligns with Tesla’s interest in tapping into the growing demand for EVs among the country’s middle-class consumers. Despite government efforts, India’s EV market remains modest, with battery-powered cars accounting for just 1.3% of total passenger vehicles sold last year.
Tesla currently avoids direct imports into India due to high tariffs. When its locally made cars are launched, they could retail for around $20,000. Trade Minister Piyush Goyal, who visited Tesla’s plant in California, noted in September that Tesla plans to nearly double its purchases of auto parts from India to $1.9 billion this year.
India and Tesla resumed discussions in May after a year-long impasse, with the government reportedly considering reducing import taxes for international EV manufacturers for five years if they commit to establishing local factories.
