Tesla Is Hesitant to Set Up Manufacturing in India – What’s Holding It Back?
Have you ever wondered why the world’s most valuable EV company still hasn’t built a factory in one of the largest automobile markets – India?
India offers a booming electric vehicle future, a population of over 1.4 billion, and growing clean energy adoption. So why is Tesla hesitant to manufacture in India? This blog dives deep into the reasons behind Tesla’s reluctance, the complexities of India’s EV ecosystem, and what needs to change to make Tesla’s arrival a reality.
1. Import Duties: The Biggest Roadblock
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India imposes import duties of up to 100% on fully built EVs.
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Elon Musk has repeatedly expressed concern over these “prohibitively high tariffs.”
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Tesla wants a lower duty structure to test the market before committing to local production.
Real-Time Example:
In 2021, Tesla requested the Indian government to temporarily reduce import duties to bring in limited units of Model 3 and Model Y. However, the Indian government insisted on local manufacturing commitments first — a classic chicken-and-egg situation.
2. Uncertainty in EV Policy & Lack of Consistency
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India’s EV policy landscape is constantly evolving – subsidies change frequently, state-level policies vary, and long-term clarity is lacking.
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Tesla prefers predictable and stable regulatory environments for its investments.
Example:
In contrast, Tesla quickly set up Gigafactories in Berlin and Shanghai because both governments offered consistent, investor-friendly EV policies and clear roadmaps.
3. Supply Chain and Infrastructure Limitations
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India’s EV ecosystem is still developing – limited local vendors, few battery suppliers, and nascent EV component manufacturing.
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Tesla’s production model depends on a mature supply chain for parts, especially batteries and semiconductors.
4. The Right-Hand Drive Market is Small Globally
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India is a right-hand drive (RHD) market, but most of Tesla’s sales globally are left-hand drive.
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Setting up a plant for a relatively small RHD market adds complexity and may not yield high ROI unless export opportunities are available.
5. Tesla’s Demand for Market Testing First
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Tesla wants to import vehicles first, study customer demand, price sensitivity, and road infrastructure, then build locally.
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Indian policymakers, on the other hand, want job creation and Make in India as preconditions.
6. Strategic Prioritisation – India Not at the Top Yet
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Tesla is currently focusing on markets with higher luxury EV demand (e.g., Europe, China, U.S.).
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India, though a large car market, has lower purchasing power for high-end EVs and lacks widespread charging infrastructure.
7. Government Pushback and National Pride
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Indian officials have clearly stated:
“Build in India, don’t just sell in India.” -
While this aligns with national interests, it may delay Tesla’s entry until the company sees enough incentive to comply.
8. Hope on the Horizon – Recent Developments
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In 2024, Tesla resumed talks with Indian ministries to explore setting up an EV factory with a potential $2-3 billion investment.
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The Indian government is also considering a new policy offering customs duty waivers for companies committing to local production within a timeline (e.g., 3 years).
This could become a game-changer if a mutually beneficial deal is struck.
Conclusion: What Needs to Happen for Tesla to Enter India?
For Tesla to finally set up a Gigafactory in India, both sides need to compromise:
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India must offer a clear, long-term EV policy with incentives and reduced duties (at least initially).
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Tesla must demonstrate commitment to localisation, job creation, and long-term presence.
With India’s EV market projected to grow at a CAGR of 49% by 2030, a partnership between Tesla and India is inevitable – but only if trust and value are aligned.
