Tesla, the American multinational automotive and clean energy firm, is set to make its presence felt in India by importing electric vehicles (EVs) directly from its German Gigafactory. This strategy comes in light of geopolitical tensions between India and China, discouraging Tesla from importing vehicles from its Shanghai gigafactory. India and Germany’s positive relations in various areas have encouraged this decision.

Tesla has invested €5 billion in establishing its gigafactory in Brandenburg, Germany, its first European facility. This plant is responsible for producing the Model Y Crossover, with plans for further capacity expansion to accommodate 1 million units annually. Notably, Tesla is also gearing up to launch a €25,000 car (approximately Rs 20 lakh) in the Indian market.

In its pursuit to make EV imports more cost-effective, Tesla is seeking a customs duty reduction. The government appears receptive to the idea, considering that many luxury car manufacturers, such as Mercedes, BMW, and Audi, are based in Germany.

Currently, India imposes a 100 percent customs tax on imported cars with a Cost, Insurance, and Freight (CIF) value exceeding US$ 40,000, while vehicles below this threshold are subject to a 60 percent import duty.

It’s worth mentioning that while there have been reports suggesting government considerations of customs duty concessions for Tesla, no official decision has been confirmed.

Tesla’s plan for India includes initially importing kits from Germany and assembling them locally through the Completely Knocked Down (CKD) route. Over time, the car is expected to undergo substantial indigenization in India.

Puneet Gupta, Director of India & ASEAN Automotive Sales Forecast at S&P Global Mobility, sees Tesla’s entry into India as mutually beneficial. He notes that India’s growing interest in green vehicles aligns well with Tesla’s expansion plans.

Auto industry veteran Avik Chattopadhyay emphasizes the significance of introducing world-class EV technology to India. However, he cautions against expecting a sudden transformation of India’s mobility landscape, emphasizing the gradual shift toward electric vehicles.

This development underscores the potential impact of Tesla’s entry into the Indian market, signaling a significant step toward sustainable transportation in the country.

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