Tesla Not Keen on Manufacturing in India, Says Union Minister Kumaraswamy

According to a media agency, Heavy Industries Minister H D Kumaraswamy stated on 2 June that Tesla has no plans to produce electric cars in India anytime soon. Although local production is not currently in Tesla's plans, the company is getting ready for a market debut.

According to reports, Tesla is not currently exploring local manufacturing, even though it has finalised a showroom space in Mumbai's Bandra Kurla Complex and hired more than two dozen employees in India, including store managers and service professionals.

The company is anticipated to launch its first vehicle in the market within the next two to three months after starting the certification and homologation procedure to sell its EVs in India.

India Carving Attractive EV Policy to Allure International Players

In an effort to draw in big companies like Tesla, India launched a flagship EV policy in March 2024 that offered lower import taxes in return for manufacturing commitments.

Companies that invest at least INR 4,150 crore (about $500 million) to start local manufacture within three years are eligible to import up to 8,000 EVs per year at a drastically reduced charge of 15% under the proposal.

The programme is anticipated to start for applications shortly and run through March 15, 2026. The goal of the policy is to establish India, the third-largest automobile market in the world, as a major location for EV investments.

India is still interested in EVs even though demand for them is slowing down globally. A minimum revenue criterion of INR 5,000 crore in the fourth year and INR 7,500 crore in the fifth year has been introduced by the Indian government, which has lately tightened eligibility requirements under the scheme. Businesses that fall short of these goals risk fines of up to 3% of the revenue deficit.

Tesla’s Challenges in the Indian Market

By generating EVs, batteries, and charging systems domestically, Tesla's gigafactories might strengthen India's IT and manufacturing industries. Tesla must first gain acceptance, which is not without its difficulties. Given India's dealer-centric market, their direct sales strategy might need to be modified.

 A crucial component, after-sales service, must be strong. Pricing is another issue; the majority of passenger cars in India are under INR 20 lakh, indicating that the country is price sensitive.

Even before taxes are applied, the least expensive Model 3 costs $42,490 in the US (about INR 37 lakh), putting it squarely in the luxury market in India.

Tesla would need to provide more value-driven products and better prices than even China if it hopes to have more than a modest presence in India. As EV penetration keeps rising, experts believe India is prepared for more players.

Additionally, less than 3% of all passenger vehicle sales in India are electric, indicating a low level of EV adoption. However, from 5,000 units in 2020 to over 113,000 in 2024, sales have increased significantly, according to a media report.