No Factory, Just Showrooms: Tesla’s India Plan Hits a Roadblock

The Electric Vehicle giant Tesla is not interested in manufacturing its cars in India, Union Minister of Heavy Industries HD Kumaraswamy said. Though Tesla backed off, other global EV companies like Mercedes-Benz, Skoda-Volkswagen, Kia and Hyundai have shown interest in the Indian EV policy.

Tesla, led by Elon Musk, is vying to sell cars in the country by opening showrooms but not willing to manufacture them in India, the Union Minister said. This decision by Tesla comes in the wake of the Indian government announcing a new electric vehicle policy earlier this year, aimed at attracting global carmakers to open production units in the country.

As per the policy, the government would reduce import taxes for foreign automakers that build electric vehicles in India. The policy mainly aims to encourage companies like Tesla to open production units. Under the new policy, companies willing to invest $486 million (over Rs 4000 crore) to build EVs in India will be allowed to import a limited number of electric cars at a lower import tax of 15%, against the current duty of 70%. To avail the tax benefits, the companies should set up a manufacturing unit in India and begin production within three years of getting approval.

The scheme is called “Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) and the application window for the scheme is scheduled to open soon. This scheme is aimed at increasing local production, generate employment and also lower prices of foreign cars for Indian buyers.

Indian automakers like Tata Motors and Mahindra & Mahindra have already made huge investments in EV production in the country. These companies are against cutting import duties for foreign car manufacturers and argue that it would hurt the domestic industries.

Meanwhile, US President Donald Trump criticized Tesla’s move and said that if the EV carmaker decides to build a factory in India just to evade US tariffs, then it is unfair to the US-based manufacturers.

In 2024, of the 4.3 million cars sold in India, only 1.1 lakh were electricity-powered. The Indian government plans to raise the share of EVs to 30% by 2030 to cut pollution and also reduce fuel imports.