India Close To $2 Billion Investment With Tesla For Local EV Production

India is close to reaching an agreement with Tesla, expected to be announced in January, allowing the import of Tesla's electric vehicles into the country reports Bloomberg. This agreement is contingent upon Tesla's commitment to establishing a battery production facility in India. The commitment requires Tesla to invest a minimum of $2 billion in a factory within India. Part of the plan involves importing components from India worth up to $15 billion, which would enable Tesla to import its electric sedans at a reduced taxable rate. The announcement is likely to be made at the Vibrant Gujarat Global Summit.

Tesla is considering various locations in Gujarat, Maharashtra, and Tamil Nadu for this facility, in line with Elon Musk's ambition for a sub-$30,000 electric vehicle and following his meeting with Prime Minister Modi last year. If the deal is finalised, Tesla could begin importing its cars to India as soon as 2024, with the factory expected to be set up by 2025.

In 2023, electric vehicles accounted for 1.3% of all passenger vehicle sales in India. High import duties have thus far prevented Tesla from selling cars in India, as EVs are already 20-30% more expensive than vehicles with internal combustion engines.

This move follows Union Minister Piyush Goyal's meeting with Tesla executives at their Fremont facility. However, Goyal was unable to meet with Elon Musk, who was unwell at the time. India, being the world's third-largest automotive market, has not yet seen Tesla selling its products.

India prefers manufacturers to produce their products within the country, but Tesla's insistence on importing vehicles from its Chinese and German gigafactories has been a significant obstacle. It now appears that Tesla will import from its German facility, considering India's strained relations with China.

This new deal follows indications from Piyush Goyal that import tariffs might be reduced for international EV makers who commit to local production for five years, which is what Tesla seems to be doing.

Many international brands like Hyundai, Volkswagen, and Mercedes, which have already made significant investments in local production, appear to be against this new rule change, seen as being made solely to attract Tesla.