Tesla Gears is set to enter the Indian market within the next few months, starting with imported electric vehicles (EVs) and flagship outlets in Delhi and Mumbai. However, there are no immediate plans for local manufacturing. Instead, the government is focusing on integrating India into Tesla’s global value chain, potentially offering further import duty relief to attract the EV giant.
Tesla to Begin India Operations With Imports
Elon Musk’s Tesla will initially bring its EVs to India through direct imports, rather than committing to local production right away. The company plans to gradually increase local sourcing over time. According to government officials, Tesla is not yet ready to establish a manufacturing facility in the country but will begin by importing cars and progressively incorporating locally made components and spare parts.
The government sees value in allowing Tesla’s entry even without an immediate manufacturing commitment. Officials believe that excluding such EVs from the Indian market would not be beneficial, especially if they are not expected to be produced domestically within the next five to seven years. The focus is on long-term engagement, ensuring that Tesla gradually builds a stronger presence in India’s automotive ecosystem.
Potential Import Duty Relief on the Horizon
To facilitate Tesla’s entry, the government is considering further reductions in import duties for EVs. This aligns with a broader effort to relax import norms and attract leading global EV manufacturers to the Indian market. The shift in policy aims to position India as a key player in the global EV supply chain.
Currently, the Basic Customs Duty (BCD) on fully built EVs priced above $40,000 has been lowered to 70 percent, but an additional 40 percent Agriculture Infrastructure and Development Cess (AIDC) has been imposed. The 10 percent Social Welfare Surcharge (SWS) has been exempted, leading to an effective import duty of 110 percent for higher-end EVs. For EVs priced below $40,000, the import duty remains at 70 percent. Further duty relief could encourage more global players to enter the Indian market.
No Immediate Manufacturing Incentives for Tesla
Tesla’s India operations will not qualify for the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI), which provides incentives and lower duties for companies that commit to local manufacturing. Since Tesla has not yet made a manufacturing commitment, it will not benefit from this scheme.
For years, Tesla and the Indian government have been in discussions about the company’s entry into the country. The government initially insisted that Tesla Gears establish a local manufacturing unit as a prerequisite for lower import duties. However, the current strategy appears to be focused on integrating India into Tesla’s global operations by encouraging domestic production of components and spare parts rather than pushing for immediate car manufacturing.
Tesla’s First Steps in India
Tesla’s upcoming outlets in Mumbai and Delhi will mark the beginning of its official presence in India. These flagship stores will serve as entry points for Tesla to engage with Indian customers and the broader automotive ecosystem. The company’s gradual approach to expansion is expected to lead to increased local sourcing and deeper market penetration in the coming years.
As Tesla Gears takes its first steps into the Indian market, the government’s evolving policy framework may play a crucial role in shaping the company’s long-term strategy. With the potential for further import duty relaxations and increased local integration, Tesla’s journey in India is just beginning.
