Tesla in talks with India on vehicle incentives and battery making

New Delhi — Tesla has held talks with officials about Indian incentives for car and battery manufacturing, says an informed source, as the vehicle manufacturer looks anew at entering the Indian market.

The US electric car maker has proposed setting up a factory in India to build electric vehicles, Reuters reported on Wednesday. Plans to make EV batteries are also being discussed, said the source.

Tesla is “still testing the waters and trying to understand the local policies”, said the source, who declined to be named as the talks were private.

Tesla did not immediately respond to an emailed request for comment.

The recent discussions represent a shift in stance for Tesla.

Late last year it was focused on seeking lower import taxes on cars, which can be as much as 100%, and talks with the Indian government became deadlocked. India is keen for Tesla to build vehicles locally but the company argued it wanted to export first so that it could test the strength of demand.

According to the source, recent talks touched on India’s taxes on imported cars but centred mainly on how Tesla could make use of a government scheme, the source said.

India has set aside about $6bn under two programmes to boost EV sales and manufacturing. Under the schemes, automakers and battery manufacturers can get certain cashback incentives for selling and exporting locally made vehicles and parts.

“It appears Tesla has come with a different heart and head this time to take advantage of the auto boom (in India) ... Tesla can negotiate on things like taxes better if it first sets up a plant,” said Mohan Shukla of White Dolphin Media, a New Delhi-based public policy advisory firm. 

Tesla aims to sell 20-million electric vehicles a year in 2030, a level that would require massive new investment in assembly plants and battery production.

Outside the US, Tesla has a plant in Shanghai —  its largest factory worldwide — and a plant in Brandenburg, Germany.

It is building its next “gigafactory” in northern Mexico — a $5bn plant expected to come online as soon as 2024 and one where it will assemble a “next gen” vehicle.

In addition to India, Tesla has been in talks over the past year with officials in Indonesia and South Korea about potential investments.

India is the world’s third-largest automobile market. Prime Minister Narendra Modi’s administration has set an ambitious target of having EVs account for 30% of India’s total car sales by 2030 from about 1% today.

While Tata Motors leads EV sales in India, China’s BYD and SAIC Motor as well as Stellantis also have models on the market.

Tesla’s talks with India come at a crucial time for Modi, who is looking to attract investments in the run-up to national elections next year where he will be seeking a rare third term.

Reuters