New Delhi, June 2, 2025:
Tesla, the world-renowned electric vehicle (EV) company led by Elon Musk, is not planning to manufacture its vehicles in India anytime soon. This statement was confirmed by Heavy Industries Minister H.D. Kumaraswamy on Monday, despite recent developments like showroom bookings and job postings by the company in India.
Tesla Prefers Showrooms Over Factories
“Tesla only wants to open showrooms and sell imported cars,” the minister told reporters, dismissing the notion that the company is ready to build manufacturing facilities in India. This statement comes even as the Indian government introduced a lucrative EV manufacturing policy to attract global auto brands.
Tesla has been eyeing India for several years, but has repeatedly raised concerns over high import duties. India currently imposes a 70% duty on imported electric vehicles, which significantly raises the price of Tesla cars.
New EV Policy Offers Lower Import Duty with Investment
To address such concerns and attract companies like Tesla, the Indian government announced a new scheme earlier this year. The Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) allows companies to import a limited number of EVs at a reduced import duty of 15%, instead of 70%. However, this benefit is only available to those who commit to investing at least $486 million (approximately ₹4,000 crore) in local EV manufacturing.
Despite these incentives, Tesla has not shown interest in committing to local production, according to Minister Kumaraswamy.
Global Auto Giants Show Interest
While Tesla remains hesitant, other global automakers are showing enthusiasm for India’s EV future. According to the minister, companies like Germany’s Mercedes-Benz and Skoda-Volkswagen (VW), as well as South Korea’s Hyundai and Kia, have expressed interest in setting up EV manufacturing units in India.
The formal application process for the new EV policy is expected to open soon, after which the government will begin accepting proposals from eligible companies.
Challenges for Tesla in India
Several challenges could be behind Tesla’s reluctance to manufacture in India:
-
Pricing Issues: Tesla’s most affordable car, the Model 3, costs around $42,000 (roughly ₹37 lakh). This puts it in the luxury segment in India, where the majority of car sales are below ₹20 lakh. Even if imported under the reduced 15% duty, Tesla cars will remain expensive for most Indian buyers.
-
Dealer Model Mismatch: Tesla follows a direct-to-customer sales model in the U.S. and other markets, which might not work well in India’s dealer-based car market. Adjustments to the sales strategy may be necessary.
-
Aftersales Support: Building a reliable aftersales service network is crucial, especially for electric vehicles that require special care and technical know-how.
-
Import Dependency: Reports suggest that Tesla plans to import initial batches of its cars from Germany, further adding to the cost due to logistics and duties.
Hope for a Cheaper Tesla?
There has been long-standing speculation about Tesla launching a more affordable model, often referred to as “Model 2,” priced around $24,000 (approximately ₹20 lakh). Elon Musk hinted earlier this year that a cheaper model might be launched in 2025. However, reports from China suggest the company is focusing on a stripped-down version of the existing Model Y rather than building an entirely new affordable car.
If Tesla does go ahead with a low-cost model, it could improve its chances in the Indian market. But for now, the absence of a manufacturing commitment puts Tesla at a disadvantage compared to competitors willing to “Make in India.”
India’s EV Market Is Growing
Despite challenges, India’s EV market is growing rapidly. Electric passenger vehicle sales jumped from just 5,000 units in 2020 to over 1.13 lakh units in 2024. Though EVs still represent less than 3% of the total passenger vehicle market, the growth trend is strong — especially in the premium segment that Tesla targets.
According to Ravi Bhatia, President of automotive consultancy Jato Dynamics, “India is ready for more players. Tesla can succeed here, but only if they match pricing expectations and offer value.”
