Tesla to import cars from Germany, not China, as India plans take shape

The Berlin factory, which produces the Tesla Model Y, is now likely to manufacture right-hand drive vehicles for the Indian market

As Tesla gears up to enter the Indian market, the electric vehicle (EV) giant is expected to import cars from its German factory instead of China, following concerns raised by the Indian government, The Times of India reported on Thursday.

 

Tesla will likely seek benefits under India’s new EV policy, announced in March 2024. The policy allows companies to import up to 8,000 vehicles annually at a reduced customs duty of 15 per cent, significantly lower than the current 110 per cent, provided they commit to investing at least Rs 4,150 crore (approximately $500 million) in a local production facility. The policy also mandates a certain level of domestic value addition (DVA) to encourage local sourcing of components. 

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The company, led by Elon Musk, is also attracting strong interest from several Indian states vying to host its manufacturing facility, with Gujarat, Maharashtra, Tamil Nadu, and Telangana emerging as frontrunners.

 

States compete to attract Tesla deal

State governments are in a race to attract Tesla’s investment, with key officials working to present compelling incentives and infrastructure benefits. “There is both excitement and urgency among investment departments in leading states as they push to secure Tesla’s presence. The aim is to engage with the company at the earliest and explore potential incentives,” a source familiar with the discussions told The Times of India.

 

Tamil Nadu and Maharashtra already serve as key automotive hubs, while Gujarat has attracted significant automobile investments in recent years. Their proximity to ports offers a strategic advantage, as Tesla intends to use its India plant as an export base alongside catering to the domestic market. 

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Tesla to invest $2-3 billion in mfg unit

According to Tesla’s initial proposal to the government, the company plans to set up a factory with an annual production capacity of 500,000 vehicles, investing between $2 billion and $3 billion. One of Tesla’s major initiatives in India will be the development of a budget-friendly electric car, expected to be priced between Rs 20-25 lakh, making EVs more accessible to Indian consumers.

 

The prospect of securing a large-scale investment from a high-tech company like Tesla has heightened competition among state governments. Some states had initiated preliminary discussions with Tesla’s management last year when the company was first considering an India entry. With progress now at an advanced stage, negotiations are likely to intensify, including discussions on logistical aspects such as rail connectivity to ports for seamless exports.

 

Tesla is reportedly aligned with the Indian government’s stance on reducing imports from China, given the geopolitical sensitivities between the two nations. The Berlin factory, which produces the Tesla Model Y, is now likely to also manufacture right-hand drive vehicles for the Indian market. 

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With the company set to begin operations in India through imports before transitioning to local manufacturing, all eyes are now on the final location of Tesla’s much-anticipated gigafactory.