Tesla scraps plans for production in India, focuses on showrooms

Published: 2025-06-03 09:01:28 ET TSLA

Published on 06/03/2025 at 09:01

Key takeaways

India's heavy industry minister revealed Monday that Tesla does not plan to produce vehicles in the country. With this announcement, India is publicly acknowledging for the first time its inability to attract investment from Elon Musk's electric vehicle company, despite announcing incentives for global electric vehicle manufacturers last March.

While Tesla will open two showrooms in India and set up store there, other carmakers such as Mercedes Benz, Skoda-Volkswagen, Hyundai and Kia have expressed interest in manufacturing electric cars in the country. Tesla was absent from the second and third rounds of talks with stakeholders for the government's EV manufacturing plan, after it did participate in the first round.

Trump dissatisfied with manufacturing in India

This news follows U.S. President Donald Trump's statement in February in which he deemed it "unfair" for Tesla to build a factory in India when production was for export. Over the years, negotiations between Tesla and India have repeatedly stalled. Initially, Tesla wanted to test demand by exporting vehicles to India before committing to local production. However, the Indian government insisted on local production, putting Tesla's 2022 plans on hold.

Government incentives for EV manufacturers

In early 2023, Musk indicated that he was "trying to figure out the right timing" for investment in the Indian market. His meeting with Prime Minister Narendra Modi in Washington DC earlier this year focused on possible cooperation on technology and innovation. Last year, India lowered import taxes on EVs for global carmakers looking to invest $500 million and begin local production within three years - a move prompted by Musk's complaints about high import taxes hindering Tesla's entry into the Indian market.

Analysts suggest that the Indian EV market may not yet be mature enough to attract Tesla's investment. EV sales currently account for less than 3 percent of total passenger car sales in India, and domestically produced alternatives may cost significantly less than Tesla's base model. Concerns about charging infrastructure and local road conditions could further deter Tesla from entering the market.

Indian market dominated by Tata Motors

Tata Motors dominates the Indian EV market with a share of more than 60 percent, followed by MG Motors - a joint venture between India's JSW and a Chinese firm - with a 22 percent share. Globally, Tesla faces increasing competition from Chinese players such as BYD. The company had its lowest sales in three years in the first quarter of 2025 following protests against Musk's involvement with the Trump administration. Musk recently announced his departure from this government position.

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