A new report states that Tesla has proposed to build a factory in India during a meeting with officials today. After years of negotiation in the world’s most populous country, it would mark a reversal of its strategy.
India has the biggest auto market that Tesla has yet to enter.
For years, Elon Musk said that Tesla’s launch in India was imminent, but strong import tariffs have made it difficult. Nonetheless, the automaker has had some indications of preparing for a launch over the last year.
In 2021, Tesla officially incorporated an Indian company in Bengaluru, the capital of India’s southern Karnataka state. During the summer, Indian government officials said that they are considering Tesla’s proposal to greatly reduce import duties for electric cars, which has been the main hurdle for the company to enter the market.
The government has maintained high import duties on EVs to encourage local production, but so far, it has mainly resulted in preventing automakers to import popular EVs produced outside the country, including in China.
Tesla has expressed interest in building a factory in the country, but as it has done in every other market, the automaker prefers to first test the waters with imported vehicles.
In 2021, Tesla vehicles have been spotted being tested on Indian roads (pictured above), and it got seven electric vehicle variants approved in the country.
However, the company wasn’t able to come to a deal on import tariffs, and in 2022, Tesla decided to put its plans to enter the Indian market on hold.
Over the last few days, there were local reports in India that Tesla sent executives in the country to meet with officials.
Now Reuters that Tesla has proposed a new factory in India:
Tesla Inc has proposed setting up a factory in India to build electric cars for domestic sale and export, the carmaker told government officials on Wednesday, according to a source with direct knowledge of the matter.
This would mark a change in strategy with starting sales in a market by first establishing production.
It makes sense that Tesla would give up on that at some point. India is just too big of a market not to participate.
In lieu of important cars in the country, I am sure Tesla did its homework over the last year to make sure it can efficiently enter the market with its own factory first.
It also makes sense with cheaper Tesla vehicles coming. If Tesla builds a factory in India, it will start by producing its new “$25,000 Tesla” built on its next-generation platform that requires much lower capital expenditure to deploy.
Author: Fred Lambert