India is nearing an agreement with Tesla Inc. that would allow the US manufacturer to begin shipping electric vehicles to the nation next year and establish a facility within two years.
Tesla would commit an initial minimum investment of roughly $2 billion in any facility and would attempt to grow purchases of car parts from the country to as much as $15 billion. To cut costs, the US manufacturer would also like to manufacture some batteries in India.
Breaking into the world’s most populous country, where demand for electric vehicles is increasing among aspirational middle-class buyers, would be a windfall for Tesla, which already has plants in the United States, China, and Germany.
The government has been working to enhance domestic EV production and encourage faster adoption of cleaner transportation.
Despite these efforts, India’s EV sector has yet to take off, with battery-powered vehicles accounting for only 1.3% of total passenger vehicle sales in 2018. Buyers are hesitant to make the switch due to the high upfront cost of electric vehicles and a scarcity of charging facilities. Because of the high taxes, Tesla does not import automobiles directly into India. When its first locally manufactured cars are on sale, they might cost as little as $20,000. India is reportedly rumoured to be considering decreasing import taxes for international EV manufacturers for a five-year term if such companies commit to establishing local manufacturing.