Tesla (NASDAQ:TSLA) has opted not to establish a manufacturing base in India, despite the Indian government’s rollout of a new electric vehicle (EV) policy intended to attract global automakers, a government official confirmed on Monday.
The revised policy, which took over a year to finalize, was widely viewed as a strategic effort to lure Tesla to set up local production in the world’s third-largest automobile market. Under the scheme, foreign EV makers are allowed to import a limited number of vehicles at a sharply reduced import duty—15% instead of the standard 70%—provided they invest at least $486 million in domestic manufacturing within three years and meet specific local sourcing requirements.
While the program has caught the attention of other automakers such as Mercedes-Benz (TG:MBG) and Volkswagen (TG:VOW3), both of which are evaluating the opportunity, Tesla has ultimately decided to forgo production plans in India.
Tesla CEO Elon Musk had previously voiced concerns about India’s steep import duties, labeling them among the highest globally. Although the new framework attempted to address those concerns, it appears the revisions were not enough to convince the company to commit to local manufacturing.
The decision comes amid ongoing resistance from India’s domestic auto industry. Companies like Tata Motors (NYSE:TTM) and Mahindra & Mahindra (USOTC:MAHMF), both of which have already made significant investments in homegrown EV production, have opposed reductions in import tariffs that could threaten their competitive advantage.
Despite its growing ambitions, India’s EV market remains in the early stages. As of 2024, electric vehicles accounted for just 2.5% of total car sales—roughly 4.3 million units—led predominantly by Tata Motors. The Indian government aims to ramp this figure up to 30% by 2030 as part of its broader clean energy push.