India is reportedly finalizing a deal with Tesla Inc. that would allow the American automaker to import its electric cars to the country starting next year and establish a factory within two years. The announcement of this agreement may be made at the Vibrant Gujarat Global Summit in January. Gujarat, Maharashtra, and Tamil Nadu are being considered as potential locations for the factory due to their existing ecosystems for electric vehicles and exports.
According to sources, Tesla is expected to make an initial minimum investment of around $2 billion in the plant and aims to increase its purchases of auto parts from India to as much as $15 billion. Additionally, the company plans to produce some batteries in India in order to reduce costs. However, no final decision has been made and these plans could still change. Tesla CEO Elon Musk previously stated that the company plans to make a significant investment in India and intends to visit the country in 2024.
Representatives from India’s Ministry of Heavy Industries, Ministry of Finance, and Ministry of Commerce and Industry have not commented on this matter, and Tesla has also not responded to requests for comment.
Entering the Indian market, where demand for electric vehicles is increasing among middle-class consumers, would be highly beneficial for Tesla. Currently, the company has factories in the United States, China, and Germany. The Indian government, led by Prime Minister Narendra Modi, has been actively promoting domestic manufacturing of electric vehicles and encouraging the adoption of cleaner transportation.
However, despite these efforts, the electric vehicle market in India has not yet taken off significantly, with only 1.3% of total passenger vehicles sold last year being battery-powered cars, according to BloombergNEF. This is mainly due to the high upfront cost of electric cars and the lack of charging infrastructure, which has made consumers hesitant to make the switch.
Trade Minister Piyush Goyal, who recently visited Tesla’s plant in California, stated in September that the company plans to nearly double its purchases of auto parts from India to $1.9 billion this year. Last year, Tesla sourced auto parts worth $1 billion from India.
Tesla and India resumed discussions in May after a year-long deadlock. Elon Musk has criticized India’s high import taxes and EV policies, while India has advised Tesla not to sell cars in the country that are manufactured in China, its political rival. India is now considering reducing import taxes for international EV manufacturers for a period of five years, as long as they commit to establishing local factories.
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