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Tesla Scouting Locations for Potential $2-3 Billion Electric Car Plant in India

Billionaire Elon Musk's Tesla is setting its sights on India. According to a report by the Financial Times, Tesla will be sending a team this month to scout locations for a potential electric car manufacturing plant estimated to cost between $2 billion and $3 billion.

This move comes after India recently reduced import taxes on electric vehicles (EVs) built by carmakers who invest at least Rs 4,150 crore and commit to starting production within three years. Tesla appears to be targeting states with established automotive hubs and ports, focusing on Maharashtra, Gujarat, and Tamil Nadu. These port locations would streamline car exports.

Tesla's Push into India Amidst Evolving Market Dynamics

Tesla's foray into India coincides with a slowdown in EV demand and increased competition in its primary markets – the US and China. This challenging market landscape resulted in Tesla missing delivery estimates and reporting a drop in first-quarter deliveries.

The report suggests Tesla might even consider establishing a battery plant in India, mirroring the "gigafactory" model employed at their existing facilities in California, Texas, Berlin, and Shanghai. These gigafactories are production centers where suppliers set up shop near the main manufacturing plant.

Elon Musk's Long-Awaited Entry into the Indian Market

Elon Musk, Tesla's CEO, has harbored ambitions of entering the Indian market for years. However, the Indian government previously insisted on a commitment to local manufacturing. Talks between Tesla officials and government representatives have been ongoing for the past year, with Musk even meeting Prime Minister Narendra Modi in June 2023.

A Potential Boon for India's EV Industry

A confirmed Tesla investment would be a significant win for Prime Minister Modi's government, particularly leading up to the 2024 Lok Sabha elections. Tesla previously expressed interest in building a factory to produce a $24,000 electric vehicle in India, while also advocating for lower taxes on their higher-priced models.

Analysts predict that Tesla's potential entry could trigger further investments in the Indian EV sector and benefit domestic auto parts manufacturers. India's EV policy mandates a localization level of 25% by year three and 50% by year five to avail the reduced import duty of 15% on Completely Built Units (CBUs). This policy, applicable to cars priced at a minimum of $35,000, is expected to facilitate technology transfer, product diversification, and cost competitiveness within the Indian automotive industry, ultimately accelerating EV adoption.

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