Tesla ditches India production plans, focuses on showroom expansion

Tesla, the electric vehicle (EV) giant led by Elon Musk, has confirmed that it is not interested in manufacturing cars in India but plans to open showrooms in the country, Union Heavy Industries Minister H.D. Kumaraswamy said on June 2.

The announcement came as the Indian government unveiled detailed guidelines for its new initiative aimed at promoting the manufacturing of electric passenger vehicles in India.

Under the scheme, global automakers are encouraged to set up manufacturing facilities in India, with significant investments and commitments to local manufacturing. However, Tesla, which had previously shown interest in the Indian market, is not expected to participate in manufacturing under the scheme.

“Tesla is more focused on starting showrooms in India, but they are not interested in setting up manufacturing units here,” Minister Kumaraswamy told reporters during a media briefing. While the EV maker has participated in early discussions regarding the scheme, it has not shown interest in moving forward with production plans in India.

Other global EV makers show interest in India

In stark contrast, other global automakers such as Mercedes-Benz, Volkswagen-Skoda, Hyundai, and Kia have expressed strong interest in the central government’s scheme and are keen to establish manufacturing units in India, according to Kumaraswamy. These companies have already indicated their intent to apply for the scheme once the official application process opens.

Tesla’s reluctance to establish a production base in India is not entirely surprising. The company has previously voiced concerns over the country's high import duties, which can reach up to 110 per cent on foreign-made vehicles.

However, the Indian government has announced a reduction in customs duties on electric vehicles (EVs) under its new policy, which allows a maximum of 8,000 imported EVs every year to be brought in at a reduced duty of 15 per cent for five years, provided the companies commit to local manufacturing.

The scheme is expected to boost the country’s EV industry, generate employment, and align with India’s long-term goal of achieving net-zero emissions by 2070. To qualify for the reduced import duties, foreign companies must invest at least ₹4,150 crore (approximately $500 million) and meet certain local value addition targets.

The window for applying under the scheme will open in the coming weeks, with the government looking to attract global players to set up a manufacturing base in India.

While Tesla has opted to focus on imports and showrooms in India, the potential investment by Mercedes-Benz, Hyundai, and others signals a growing interest in India’s EV sector. The government's push to turn India into a global hub for EV manufacturing is poised to transform the country’s automotive landscape.

With the global EV market becoming increasingly competitive, especially with the rise of Chinese EV manufacturers like BYD, the success of India’s new policy could have long-term implications for both the domestic and international automotive industries.