Elon Musk and Mukesh Ambani
As Tesla's anticipated debut in India gains traction, local media reported that discussions between CEO Elon Musk and Indian industrialist Mukesh Ambani, Asia’s richest man (net worth: $117.5 billion, as per Forbes), are ongoing. Image Credit: Reuters

When Elon Musk and Indian PM Narendra Modi met in New York in June, it exuded bonhomie. It also showed Tesla’s keenness to enter India, the world’s third-biggest car market. Another meeting is set later this month between the billionaire and the Indian leader.

Here’s what we know so far about Tesla’s India plans:

Why is Tesla keen on entering India?

After China and the US, India ranks as the world's third-largest automobile market, valued at $108.10 billion in 2022. It is projected to grow to $217.90 billion by 2031, a compounded annual growth rate of 8.1 during the period.

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Since last year, Tesla had been advocating to reduce import taxes on electric vehicles (EV) in India even as it made known its intention to put up a “gigafactory” in the subcontinent. It currently produces vehicles and batteries (at gigawatthour scale) in several gigafactories (Shanghai, China, Berlin in Germany, and Texas and California in the US).

What did India do so far?

India responded last month. It unveiled a new EV policy, which cut import taxes from 100 per cent to 15 per cent on certain models, contingent upon a manufacturer investing at least $500 million and establishing a factory in the country within three years.

Companies that meet these requirements will be allowed to import a limited number of EVs at a lower tax of 15 per cent on cars costing $35,000 and above. Overseas brands can import a limited number of EVs under the new policy.

This has boosted Tesla’s India plans. The US EV maker is reportedly planning to ramp up purchases of parts from the subcontinent to as much as $15 billion. During the June meeting with PM Narendra Modi in New York, Musk said he sees potential in the country for sustainable power generation through solar and wind, and energy storage in stationary batteries.

What does the new policy mean?

New Delhi’s move is seen as a boon for Tesla’s India plans. It could also benefit any would-be renewable energy manufacturing company, and is hoped to create an EV and battery "ecosystem", in which India is a key player.

Musk recently stated on X that “India should have electric cars like every other country has electric cars. It's a natural progression to provide Tesla electric vehicles in India.”

What do experts say about it?

Arun Malhotra, an auto industry veteran, said Tesla’s entry into India could set the wheels in motion – potentially transforming the country into a hub for supply chain, manufacturing, and battery technology, thus bolstering the global EV ecosystem.

Malhotra told ET Now: “We need something to shake up the entire ecosystem. I view it from that perspective, not solely in terms of Tesla's EV sales potential in India.”

How big is India’s EV market?

In 2023, electric vehicle (EV) sales in India reached an unprecedented 1.53 million units, reflecting a remarkable surge of over 50 percent compared to the 1 million units sold in 2022. It is dominated by domestic carmaker Tata Motors.

Stock - Musk Modi
US billionaire Elon Musk is set to visit India later this month to meet PM Narendra Modi. File photo shows their New York meeting in June 2023. In addition to electric vehicles, Musk said he sees potential in the country for sustainable power generation through solar and wind, and energy storage in stationary batteries.

According to data disclosed by the Ministry of Road Transport and Highways through its Vahan Dashboard, EVs comprised 6.4 percent of the total automobile sales.

While the EV market presently remains modest, it is expanding and largely dominated by domestic automaker Tata Motors. Despite EVs constituting only 6.4 percent of total car sales in 2023, the government aims to raise this figure to 30 percent by 2030.

Where is Tesla most likely to build its factory?

Tesla is reportedly looking for an initial site for a “$2 to $3 billion” EV factory, the Financial Times reported last week. Local media reported that the EV maker is looking at the Indian states known as automotive hubs – including Maharashtra, Gujarat and Tamil Nadu.

Tesla officials, including Musk, are set to visit India later this April to scout locations for a manufacturing facility. Meanwhile, Tesla has initiated production of right-hand drive cars at its “Giga Berlin” (Germany) for export to India later this year.

Will Tesla have a local partner?

As Tesla's anticipated debut in India gains traction, local media reported that discussions between Musk and Indian industrialist Mukesh Ambani, Asia’s richest man (net worth: $117.5 billion, as per Forbes), are ongoing.

Maruti Suzuki
According to IPO Central, the Top 10 automakers in India are: Maruti Suzuki India, Hyundai Motor India, Tata Motors, Mahindra & Mahindra (M&M), Kia Motors, Toyota Kirloskar India, Honda Cars India, Renault Motors, Skoda Motors, and MG Motor India. Photo shows a Maruti Suzuki Swift on display at a car show. Image Credit: Supplied

The Hindu BusinessLine reported that Tesla is engaged in talks with Ambani’s Reliance Industries Ltd. regarding a potential collaboration.

The report quotes "a person familiar with the situation", stating discussions are preliminary, and have been ongoing for over a month.

Another source mentioned that while Reliance’s role has yet to be finalised, it is expected that the Ambani-led conglomerate will play a significant part in setting up the Tesla factory and the associated Tesla “ecosystem” in India.

Why is Tesla's move important for India?

For years, India has actively pursued foreign companies to establish manufacturing operations within its borders, aiming to generate more jobs and develop its economy.

India AMP 2026 Tesla in India
Image Credit: Jay Hilotin | Gulf News | Supplied

Moreover, an investment decision by Tesla during an election year would further enhance Modi's reputation as a business-friendly leader.

Musk's visit to India coincides with the nation entering a two-month-long election phase, involving nearly a billion voters, commencing on April 19. Modi is widely anticipated to secure a rare third term in office.

Will Made-in-India Teslas be more affordable?

India, like the rest of the world, seeks to switch to greener transport, by harnessing industrial policy to drive up local jobs and production.

Tesla's entry into the Indian market is seen spurring more EV investments and boosting local auto parts makers, analysts have said. The company said in July it was interested in produce an EV priced at $24,000 in India.

Tesla: Demand hits speed bump
Tesla's entry into the Indian market aligns with a downturn in EV demand in its primary markets of the United States and China, compounded by increased competition from Chinese automakers. Tesla's first-quarter deliveries experienced a decline.

Tesla's venture into India comes amidst a period of shrinking first-adopters EV demand in its key markets of the US and China, alongside intensified competition. Although Tesla reported a decrease in its Q1 2024 deliveries, it has surpassed BYD to become the world's leading EV manufacturer.

What happens next?

The US billionaire will meet PM Modi in the week of April 22 in New Delhi, and will separately make an announcement about his India plans, Reuters reported, citing two sources who declined to be named as the trip details are confidential.

India’s AMP 2026
India’s Automotive Mission Plan (AMP) 2026 is a strategy devised by the Government of India and the Indian Automotive Industry and has set ambitious targets.

• The Indian auto industry is capable of hitting a revenue of $300 billion by 2026, a five-fold rise, with volumes logging in over three-fold increase to around 76 million units by 2026, according to the strategy paper.

• AMP 2026 has set the trajectory of the evolution of the automotive “ecosystem” in India – including the glidepath of specific regulations and policies that govern research, design, technology, testing, manufacturing, import/export, sale, use, repair, recycling of automotive vehicles, components, and services.

• AMP 2026 sees the auto industry the “mother of the manufacturing sector in an economy”, as its fortunes directly impact several related manufacturing industries – iron and steel, aluminum, lead, rubber, plastics, glass, machine tools, molds and dies, chemicals, and capital goods. The auto industry also covers the services sector, including logistics, banking, insurance, sales and distribution, service and repair, and fuels.”

• “The rapid growth of the Indian automotive industry will provide a strong fillip to the micro, small and medium industries of the country across multiple sectors, the development of which is one of the Government’s principal objectives” (Source: AMP 2026)