Tesla to scout sites in India for $2bn-$3bn EV plant

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Tesla Motors will this month send a team to scout locations in India for a proposed $2bn-$3bn electric car plant, according to two people with direct knowledge of the electric vehicle company’s plans.

The step towards making vehicles in India comes after New Delhi last month lowered tariffs on higher-priced imported EVs for companies that commit to making them in the country within three years.

The tariff cut was a concession Tesla had been pushing for as a precondition for investing.

The people with knowledge of Tesla’s plans said it would send a team from the US by late April to study sites for the plant, focusing on states with existing automotive hubs, including Maharashtra and Gujarat in the west and Tamil Nadu in the south.

Some automakers have plants in Haryana state, neighbouring New Delhi, and one of the people said they thought Tesla might also scout potential sites around the capital. However, the second person said the focus of Elon Musk’s company would be on the other three states because they had ports, making it easier to export cars.

The people did not want to be identified because of the sensitivity of the matter. Tesla did not respond to a request for comment. 

A confirmed Tesla investment would be a major boost for Prime Minister Narendra Modi’s government ahead of a general election that begins this month in which its record on business and job creation will be in sharp focus.

Modi pushed Musk to invest in India when the two met during a visit to the US by the prime minister last year. Musk said then that the electric-car manufacturer would “be in India . . . as soon as humanly possible”.

Modi has earmarked billions of dollars’ worth of government subsidies to promote manufacturing, including in critical industries such as EVs, where India’s geopolitical rival China has a strong lead. 

Tesla has told Indian officials it is considering building a smaller car in the proposed new factory than its current models, which would be priced at less than $30,000. It could then sell the model in India and export to south-east Asia, the Gulf, Africa, and southern and eastern Europe.

The carmaker is developing a cheaper vehicle to go on sale late next year, but has not yet said where the car — which has been dubbed “Model 2” by Tesla observers — will be manufactured.

The potential expansion of Tesla’s global factory network comes as growth in global EV sales slows. The group is also building a plant in Mexico that is expected to come online in 2026.

One of the people familiar with Tesla’s plans said the company was considering beginning with a $2bn-$3bn investment in the Indian car plant. Suppliers would invest billions of dollars more, making this one of India’s biggest inward foreign investments. 

The company expected the factory to reach production of as many as 500,000 cars a year when it reached full capacity, the people said. Tesla might later also look at setting up its own battery plant, following the “gigafactory” model it has followed at its plants in California, Texas, Berlin, and Shanghai, where suppliers have set up shop next to or near the mother plant.

India has been much slower to build and adopt EVs and charging infrastructure than China, whose top producer BYD is Tesla’s closest rival in terms of global sales.

BYD submitted a proposal to build a plant in India last year in partnership with an Indian company, Megha Engineering. However, according to Indian government officials, the project has so far failed to secure approval from New Delhi.

India in 2020 introduced stringent restrictions on countries with which it shares a land border, measures that are seen as targeting China.

Alongside local EV makers including Tata Motors and Mahindra, Vietnam’s VinFast plans to build a $2bn plant in Tamil Nadu. Indian steelmaker JSW last month launched a $1.5bn tie-up with China’s SAIC Motor to build and sell EVs in India.

An Indian official, who asked not to be identified, said the government would by the end of this month formally invite applications for the EV tariff reduction scheme, under which eligible companies will be allowed to import up to 8,000 vehicles a year.