Tesla to explore locations in India for $3 billion EV factory, FT reports

107396571 1712192116739 gettyimages 1239417007 AFP 326N86Z

107396571 1712192116739 gettyimages 1239417007 AFP 326N86Z

An image of a model Y electric vehicle was pictured at the start of production in Tesla’s Gigafactory on March 22, 2022 in Gruenheide, southeast of Berlin. Tesla had received approval for its gigafactory in Germany on March 4, 2022 which allowed production to begin despite facing setbacks and delays in the approval process.

Tesla will scout locations in India to set up an electric vehicle factory reportedly costing up to $3 billion, according to a report by the Financial Times. This move aligns with Indian Prime Minister Narendra Modi’s plans to heighten domestic manufacturing. The plant could be worth between $2 billion and $3 billion, as reported by the Financial Times. Tesla will mainly focus on the states of Maharashtra, Gujarat, and Tamil Nadu that currently house automotive hubs.

Last month, India had revised its import tariffs on specific EVs for automakers willing to invest a minimum of $500 million and begin domestic manufacturing within three years. The Indian government had approved a scheme to promote India as a manufacturing destination so that e-vehicles with current technology can be made in the country. PM Modi had met Tesla CEO Elon Musk in June and had invited him to consider investment opportunities in India for electric vehicles.

In 2021, India gave its approval for a production linked incentive scheme for automobile and auto components with a budget of rupees 25,938 crore (around $3.1 billion) over five years as an attempt to boost domestic production and lower dependence on imports. The scheme was extended for another year at the start of January.

According to Canalys analyst Ashwin Amberkar, Tesla is viewed as the most attractive electric vehicle maker for India given its massive appetite for global expansion and its ability to create EV production ecosystems. He added that the new Indian EV policy brings increasing incentives, which provide a prime opportunity for Tesla to establish a strong presence in the country.

Tesla is currently competing with China’s BYD, which exceeded the U.S. EV giant in Q4 of 2023 as the top EV maker, selling more battery-powered vehicles than Tesla. However, in Q1 of 2024, BYD’s sales decreased below Tesla’s.

The China EV market comprises about 60% of global EV sales. Various brands including BYD, Xpeng and Xiaomi have been increasing the market competition with price wars and launching new models.

Tesla is reportedly looking to set up an electric vehicle (EV) factory in India with potential investment worth up to $3 billion. The EV maker is said to be focusing on states with existing automotive hubs, such as Maharashtra, Gujarat, and Tamil Nadu. India recently lowered import tariffs on some EVs for automakers willing to invest a minimum of $500 million and commence domestic manufacturing in the country within three years. This development is in line with Prime Minister Narendra Modi’s plans to enhance domestic manufacturing. The factory could be worth between $2 billion and $3 billion, sources cited by the Financial Times stated.

Furthermore, India approved a production-linked incentive scheme in 2021 for the automobile and auto components sectors, which included a budget of approximately $3.1 billion over five years to incentivize domestic production and reduce import dependence. The scheme was extended by another year starting January 1. Canalys analyst Ashwin Amberkar said that Telsa was an attractive option for India due to its willingness to invest in global expansion and its capability to develop EV production ecosystems.

In related news, Tesla is currently in a competitive battle with Chinese EV manufacturer BYD. BYD managed to surpass Tesla in the last quarter of 2023 in global EV sales, however, BYD’s sales fell below Tesla’s in Q1 2024. The market for EVs in China accounts for nearly 60% of global EV sales.

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