India Finalizes EV Policy, but Tesla Hesitates at Local Production Plans

India has rolled out its new electric vehicle (EV) policy aimed at attracting global automakers with reduced import taxes, but Tesla is showing reluctance to set up local manufacturing, a federal minister revealed. This development, reported by Reuters, could reshape the EV landscape in the world’s third-largest car market, where players like Mercedes-Benz en Hyundai are already signaling interest.

New Policy Slashes Import Duties for Investors

India’s finalized EV policy offers significant incentives for foreign automakers willing to invest in domestic production. Companies that commit to investing around $500 million to build EVs in India can import a limited number of electric cars at a reduced duty of 15%, a sharp drop from the current 70%.

However, there’s a catch: automakers must establish manufacturing facilities within three years and meet local content requirements. The policy, in development for a year, was initially designed to lure Tesla into setting up a production base, but CEO Elon Musk paused those plans in 2024, citing high import tariffs as a barrier.

Tesla’s Hesitation Signals Strategic Divide

The Ministry of Heavy Industries, led by HD Kumaraswamy, expressed disappointment over Tesla’s stance. “Tesla, we are not actually expecting (interest) from them … They are not interested in manufacturing in India,” Kumaraswamy told reporters.

Instead, Tesla’s immediate focus remains on importing vehicles, despite Musk’s repeated complaints about India’s steep tariffs on foreign cars. This reluctance contrasts with competitors like Mercedes-Benz, Volkswagen, Hyundaien Kia, all of whom have shown interest in leveraging the policy to establish EV production lines in India.

India’s EV market remains small but is growing. In 2024, EV sales, led by domestic players like Tata Motors and Mahindra & Mahindra, accounted for just 2.5% of the land‘s 4.3 million total car sales. The government has set an ambitious target to increase this share to 30% by 2030, a goal that hinges on expanding manufacturing capacity and infrastructure like charging networks.

Industry Trends and Challenges Ahead

The new policy could accelerate India’s transition to cleaner mobility by incentivizing global automakers to produce locally, reducing reliance on imports, and potentially lowering EV prices for consumers. A lack of fast chargers has slowed EV adoption, deterring potential buyers in India’s nascent market.

For automakers committing to the policy, the operational implications are significant. Setting up production facilities requires substantial capital and compliance with local content rules, which could involve sourcing components like batteries and motors from Indian suppliers. This aligns with India’s broader push for self-reliance in manufacturing but adds complexity for foreign players navigating a new market.

What This Means for EV Enthusiasts

For EV owners and enthusiasts in India, the policy could eventually mean more options and competitive pricing as global brands enter the fray. However, Tesla’s absence from local production plans might delay the arrival of its popular models, like the Model Y, at affordable price points. Meanwhile, the focus on local manufacturing could spur innovation in India’s EV sector, potentially leading to advancements in accutechnologie and charging solutions tailored to the region’s needs.

As India aims to electrify its roads, the success of this policy will depend on balancing the interests of global and domestic players while addressing infrastructure gaps. For now, Tesla’s hesitation leaves a gap that other automakers are eager to fill, setting the stage for a dynamic shift in India’s EV market.

Photo courtesy of Reuters, Tesla, Mahindra & Mahindra.