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

An electric vehicle of the model Y is pictured during the start of the production at Tesla's “Gigafactory” on March 22, 2022 in Gruenheide, southeast of Berlin. – US electric car pioneer Tesla received the go-ahead for its “gigafactory” in Germany on March 4, 2022, paving the way for production to begin shortly after an approval process dogged by delays and setbacks. (Photo by Patrick Pleul / POOL / AFP) (Photo by PATRICK PLEUL/POOL/AFP via Getty Images)Patrick Pleul | Afp | Getty Images

Tesla will explore locations in India this month to set up an electric vehicle factory with an investment of up to $3 billion, according to a Financial Times report, in a boost to Prime Minister Narendra Modi's plans to bolster domestic manufacturing.

The plant could be worth $2 billion to $3 billion, FT reported on Wednesday, citing two people with knowledge about the plans.

The EV maker will focus on the states of Maharashtra, Gujarat and Tamil Nadu that already have automotive hubs, according to the report.

Tesla did not immediately respond to CNBC's request for comment.

India last month lowered import tariffs on certain EVs for automakers willing to invest at least $500 million and start domestic manufacturing in the country within three years.

“The Government of India has approved a scheme to promote India as a manufacturing destination so that e-vehicles with the latest technology can be manufactured in the country,” the government said last month.

Modi met Tesla CEO Elon Musk in June and invited him to explore investment opportunities in India for electric vehicles.

In 2021, India approved a production linked incentive scheme for automobile and auto components with a budget of 25,938 crore rupees ($3.1 billion) for a period of five years, as part of the government's efforts to boost domestic production and reduce dependence on imports. The scheme was extended by a year on Jan. 1.

“Tesla is the most attractive electric vehicle maker for India due to its large appetite for investment in global expansion appetite and its ability to develop the EV production ecosystems,” Canalys analyst Ashwin Amberkar said earlier this month.

“The new Indian EV policy offers increasing incentives, making it a prime opportunity for Tesla to establish a strong position in the country,” said Amberkar.

Tesla is in fierce competition with China's BYD, which overtook the U.S. EV giant in the fourth quarter of 2023 as the world's top EV maker, selling more battery-powered vehicles than Tesla. However, in the first quarter of 2024, BYD's sales dropped below Tesla's.

The China EV market accounts for almost 60% of EV sales worldwide. Brands from BYD to Xpeng to Xiaomi have been heating up the market with price wars and new model launches.