Tesla to explore potential sites in India for its $2bn to $3bn manufacturing plant

Tesla, led by billionaire Elon Musk, is gearing up to explore potential sites in India for its proposed $2 billion to $3 billion electric car manufacturing plant. According to a report by the UK's Financial Times, the company plans to dispatch a team from the United States later this month to assess various locations for the plant.

The decision to scout locations in India comes after the country recently announced a reduction in import taxes on certain electric vehicles, provided that manufacturers commit to investing a minimum amount and initiate commercial production within three years. Tesla's focus will primarily be on states with established automotive hubs such as Maharashtra, Gujarat, and Tamil Nadu. Although Haryana also hosts automotive plants, Tesla is reportedly eyeing states with ports to facilitate easier exportation of cars.

This move by Tesla comes amidst a backdrop of slowing electric vehicle demand and increasing competition in its key markets of the US and China, which has led to a decline in first-quarter deliveries for the company.

Tesla's CEO Elon Musk has expressed interest in entering the Indian market for several years, but the Indian government has sought a commitment to local manufacturing. Talks between Tesla officials and government representatives have been ongoing, with Musk himself meeting with Prime Minister Narendra Modi in June last year.

If Tesla proceeds with its investment in India, it could provide a significant boost for Prime Minister Modi's government, especially in the run-up to the 2024 Lok Sabha elections. Tesla had previously indicated its desire to manufacture an electric vehicle priced at $24,000 in India, while also advocating for lower taxes on higher-end models it intends to sell in the country.

Furthermore, Tesla might explore the possibility of establishing its own battery plant in India, similar to its "gigafactory" model in other locations such as California, Texas, Berlin, and Shanghai.

The potential entry of Tesla into the Indian market is expected to encourage further investments in electric vehicles and benefit local auto parts manufacturers. Moreover, it aligns with India's EV policy, which mandates a certain level of localization over specific time frames in order to avail lower custom duties on Completely Built Units (CBUs).

Analysts believe that Tesla's presence in India could facilitate access to global technologies, expand product offerings, and improve cost competitiveness, thereby driving increased adoption of electric vehicles in the country.