Tesla declines India’s local EV manufacturing deal despite incentives

Tesla has shown an obvious reluctance to commit to local electric vehicle (EV) manufacturing in India, even though the country is currently offering significant incentives to encourage such investments. 

According to what a federal minister said on Monday as the government finalized its electric vehicle policy, Tesla’s plans are currently focused on importing cars into India, not manufacturing them in the country.

Other automobile companies interested in India’s offer, but not Tesla

India’s EV policy was introduced in March 2024 and has been in the works ever since. It aims to attract global automaker giants like Tesla to create their products locally.

Tesla has expressed reluctance to this point. According to the minister for heavy industries, HD Kumaraswamy, other automobile giants like Mercedes-Benz, Volkswagen, Hyundai and Kia have shown interest in India’s EV manufacturing policy.

“Tesla, we are not actually expecting (interest) from them … They are not interested in manufacturing in India,” Kumaraswamy said.

Skoda Auto Volkswagen India also seems cautious and has said it is closely monitoring the development of EV-related policies in India and assessing their implications.

“Based on this, we define the appropriate next steps in line with our long-term strategy,” the company said in a statement.

With the policy in place, companies will be able to import a limited number of electric cars at a reduced duty of 15% versus the current 70%. However, there is a caveat. Only companies that commit to investing around $500 million to build EVs in the country are eligible, the Ministry of Heavy Industries said.

The companies will also have to set up manufacturing facilities in India, commence operations within three years of approval, and meet certain local content requirements.

As it stands, India’s EV sales is dominated by Tata Motors, which accounted for just 2.5% of the 4.3 million total cars sold in 2024. The government wants to increase this number to 30% by 2030..

Tesla’s hesitance to enter the Indian market

Tesla’s refusal to jump at India’s offer may stem from several factors. As earlier stated, Musk has complained that the country’s import tariffs are too high and the insistence on local manufacturing seems to have created a stalemate as he put his investment plans for India on hold last year.

Despite the perks the policy offers, Tesla has not presented a formal plan for local production and has instead focused on establishing showrooms in cities like New Delhi and Mumbai to sell imported vehicles.

Another possible reason for Tesla’s reluctance is the lack of fast chargers, which has deterred potential purchasers in the country’s relatively new EV market. India has limited EV charging infrastructure, far below what’s needed for mass adoption, and there are also difficulties in establishing a local supply chain, especially since there are tensions between India and China, where most of Tesla’s suppliers are based.

Rather than start manufacturing its products in India , Tesla seems to be more interested in utilizing its existing global factories, with a capacity of 3 million vehicles, to produce more affordable models by mid-2025.

This may be a smarter bet as Tesla’s current pricing is significantly above the affordability threshold for most Indian consumers, who have been known to prefer cars under $15,000.

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