Tesla's $2 Billion Investment In India Hinges On Import Tax Cuts For EVs: Report

Tesla might build a factory in India but only if the country lowers its massive import duties.

Tesla Model 3 (Highland)

Mark Kane

By: Mark Kane

Nov 25, 2023 at 6:25pm ET

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The topic of Tesla's potential investment in India returns like a boomerang every couple of months. It's clear that Tesla would like to enter India but there are business obstacles that first must be removed to make the investment viable. On the other hand, India's government tries to protect its market from highly competitive foreign products.

According to Economic Times (via Reuters), Tesla is willing to invest up to $2 billion to build a factory in India, but the decision depends on the import duties for electric cars.

Currently, buying an imported EV in India is expensive, because the import tax is as high as 100% for cars priced above the equivalent of about $40,000. The less expensive cars are taxed at 70%.

According to a recent report, the new proposition is a 15% import tax for EVs. If this is agreed upon for at least 12,000 vehicles (a year, as we understand), Tesla would be willing to invest $500 million in India, the article says. If the import volume is 30,000 vehicles, then Tesla might invest up to $2 billion.

There is no official comment on the matter, but the unofficial sources indicate that the government is analyzing the proposition.

What do you think?

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We are very interested in what type of factory Tesla might build in India. Two billion is not really enough for a large electric car plant, like in Shanghai, Germany, or Texas. Maybe it will be a final assembly site or a production site for some components.

The 15% import tax probably would be applied to all manufacturers who decide to invest in India, so we might see more foreign investments in the future. Tata Motors, as well as Mahindra and Mahindra, the largest Indian EV manufacturers, will have to compete on their own soil then.