Tesla may invest $2 billion for manufacturing in India but with conditions

Tesla is also likely to commit 20% localisation in its Made in India cars in the first two years and it may increase to 40% in four years

Tesla is eyeing an investment of up to $2 billion to set up its factory in India if it gets a 15 per cent concessional duty on imported vehicles in its first two years here, The Economic Times (ET) reported on Friday.

The US-based carmaker has provided the Centre with a proposal for the investment, the report added. If it gets a concessional duty for 12,000 vehicles, it may invest $500 million in India. This may go up to $2 billion if the concession extends to 30,000 vehicles.

The Centre, on the other hand, may push for a concessional tariff on Tesla's 10,000 units for the first year and 20 per cent in the second. Currently, India imposes a 100 per cent import duty on cars with cost, insurance and freight value of over $40,000. For vehicles cheaper than that, the import duty is 70 per cent.

The report further said that Tesla is also likely to commit 20 per cent localisation in its Made-in-India cars in the first two years, and it may increase to 40 per cent in four years.

Tesla may also come to India with three models - Model 3, Model Y and a new hatchback. Model 3 and Model Y are likely to be priced at Rs 38 lakh and Rs 43 lakh if the concession is granted. The hatchback is expected to be priced at Rs 20.75 lakh.

On November 21, Bloomberg reported that the announcement of Tesla's investment in India may be announced at the Vibrant Gujarat Global Summit in January. For the factory, Tesla is considering Gujarat, Maharashtra and Tamil Nadu because they already have well-established ecosystems for electric vehicles and exports.

Minister of Commerce Piyush Goyal, who visited Tesla's plant in Fremont, California, earlier this month, said in September that Tesla is planning to almost double purchases of auto parts from India to $1.9 billion this year. The electric carmaker sourced parts worth $1 billion from the nation last year, he said at an event in New Delhi at the time.

Tesla, in May, reopened dialogue with India — the world's third-largest automobile market — following a year-long impasse. Musk has criticised India's high import taxes and its electric vehicle (EV) policies, and India, in turn, has advised Tesla not to sell cars in the country that have been made in China, its political rival.

India is now said to be considering lowering import taxes for international EV manufacturers for five years if those firms eventually commit to setting up local factories.