Tesla is almost here in India.
Unlike a few years ago, when it raised false alarms, this time around, the plan by the Austin-based automaker seems well laid out. By April this year, the American automobile giant with a market capitalization of $1.1 trillion is set to launch operations in the country.
It is already scouting for employees, at least 13 of them, having put out job vacancies on LinkedIn, and has reportedly zeroed in on Mumbai and New Delhi to set up its first showrooms, something straight out of Apple’s playbook when it set up its own stores in India.
The automaker’s foray into the world’s fourth largest automobile market follows a meeting between Elon Musk, the world’s richest man and the CEO of Tesla, and Indian Prime Minister Narendra Modi, in the US last week. Two years ago, after a similar meeting between Narendra Modi and Elon Musk, Tesla seemed ready to launch in the country. That plan fell flat, mostly due to the high taxation structure in the country.
Now, with Donald Trump reiterating India’s high taxation and tariff structures, and India bringing import duties on vehicles that cost more than $40,000 (around Rs34.65 lakh) to 70 percent from about 110 percent earlier, Tesla seems to have had an afterthought. Reportedly, Tesla is even planning to bring aRs 21 lakh product in the country. While that might not happen immediately, especially with the cheapest Tesla costing as much as $38,000 (Rs 33 lakh) in the US, the automaker’s entry into the Indian landscape will likely shape up the segment.
To begin with, the automaker is expected to retail some of its popular models such as Model 3, Model S, and Y, importing them from its facility in Germany to capitalise on its brand value in India, before considering a manufacturing facility in the country, given its low-cost structure. Although Donald Trump has said that a decision to set up a factory in India could be unfair, Musk knows that a presence in India, one of the world’s fastest-growing automobile markets, is certain to reap rewards in the long term.
India currently has 34 cars per 1,000 people compared to over 860 per 1,000 people in the US. With growing purchasing power, cheaper access to capital, and a transition into cleaner fuels in its target to bring down emissions by 2030, the opportunity in the world’s fastest-growing large economy is obvious to Musk. For Tesla, despite the global uptake in electric mobility, sales slid 1.1 percent globally, something of a surprise, which means newer markets are a growing necessity.
Additional manufacturing facilities also will not hurt Musk, especially in Tesla’s attempt to remain a cost leader, as incumbents from the likes of Volkswagen, Mercedes, and a host of Chinese automakers, accelerate their electrification journey while drawing away Tesla’s buyers. With India also sweetening a deal now with the introduction of a revised electric vehicle (EV) policy that offers import duty concessions to manufacturers committing at least $500 million in local investments, Tesla had more reasons to rush. As part of that plan, the Indian government plans to slash import duties on EVs priced above $35,000 (cost, insurance, and freight) to 15 percent from 70 percent or 100 percent, provided manufacturers meet the minimum investment and domestic value addition requirements.
All that does not mean the market is up for taking straight away. Homegrown automakers, who have been scaling up on electric offerings, are certain to pose significant challenges. The country’s fourth largest automaker, Mahindra, for instance, had recently received a staggering 30,000 bookings for two of its new launches upon their launch. One of the two models, the BE 6, clocks 100kmph in 6.7 seconds and even has a claimed range of 682km and 20-minute fast charging capability. The other model, the XEV9e has a three-screen setup on its dashboard.
“The fact is, Tesla’s entry will no doubt shake up India’s automotive sector,” Puneet Gupta, director at S&P Mobility, tells Forbes India. “While the entry segment, where you have the likes of the Tata Punch may not be impacted, the more premium and aspirational segment, where even the brand has a value, will see significant impact. That segment is sure to come under pressure.”
“Tesla is perceived to be the most innovative among automakers,” Vinay Piparsania, the principal and founder at Gurugram-based MillenStrat Advisory & Research and a former executive director at Ford Motors. “In China, despite the homegrown automakers, Tesla has made huge inroads and disrupted the market. With a strong policy backing, that I am certain they have, they will be able to elevate the EV narrative in the country.”
Head of the Department of Government Efficiency (D.O.G.E.) and CEO of SpaceX, Tesla, and X Elon Musk meets with Indian Prime Minister Narendra Modi (R) at Blair House in Washington DC, USA on February 13, 2025. Image: Press Information Bureau / Handout/Anadolu via Getty Images
Also read: Indian auto sector in 2025: Hoping for slow but steady growth
The Indian Landscape
India’s electric vehicle segment is primarily led by the likes of Tata Motors, which corners over 60 percent of the market. That is followed by MG Motors, which has been able to make significant inroads in the electric vehicle segment with its popular model the Windsor in the past few months. Windsor’s production recently crossed 15,000 units and has consistently been the highest-selling EV since October last year, pushing Tata on the back foot.
Among the Tiago, Nexon, Punch, and the newly launched Curvv, Tata Motors once held over 80 percent of the market. The company had also put in place an elaborate plan, that it called Tata UniEVrse, an ecosystem that would leverage group synergies, from companies such as Tata Power, Tata Chemicals, Tata AutoComp, Tata Consultancy Services (TCS), Tata Digital, Tata Elxsi, and Tata Motors Finance. Still, sales of electric vehicles have remained flat, especially as competition picks pace.
Among others, apart from Mahindra, Hyundai has launched an electric version of its category-leading SUV, Creta, while Maruti Suzuki is expected to launch an electric version of its popular SUV, Vitara in April this year. Now, with Mahindra notching up record orders for its SUVs, the homegrown market is also witnessing some significant churn.
“Mahindra’s strategic foray into the premium electric SUV segment is poised to disrupt the Indian EV landscape,” says Harshvardhan Sharma, the head of auto retail practice at Nomura Research Institute. “By introducing models with extended range capabilities and competitive pricing, Mahindra addresses two primary barriers to EV adoption, which are range anxiety and affordability. This move not only intensifies competition among domestic automakers but also challenges international players eyeing the Indian market.”
Mahindra has also laid out plans to increase its annual production capacity from 90,000 to 200,000 units by March 2026, with plans for EVs to constitute 20 percent of its SUV sales by 2027 and the introduction of five additional electric models by 2030.
“We have been asked similar questions ever since the opening up of the Indian economy in 1991,” Anand Mahindra, the group’s chairman, said on February 19 on X (formerly Twitter) about Tesla’s foray into India. “How will you compete against: Tata Maruti All MNCs? But we’re still around. And working like maniacs to still be around & relevant even a century from now. With you cheering us on, we will make that happen.”
Actress Priyanka Sarkar is seen with the next Gen Mahindra Electric Origin SUVs, BE6, during the launch in Kolkata, India, on February 12, 2025.
Image: Rupak De Chowdhuri/NurPhoto via Getty Images
Still, despite all the fancy with electric vehicles in the country, the category only saw a marginal growth in sales, with the four-wheeler segment averaging sales of roughly 7,500 vehicles a month. Hybrid offerings from the likes of Maruti Suzuki and Toyota to a significant extent, had become an alternative to that transition, largely because they allay fears of range anxiety and inadequate infrastructure, while offering better fuel efficiency.
By 2030, about 40 to 45 percent of two-wheelers and 15 to 20 percent of four-wheelers (passenger vehicles) sold in India will likely be electric, according to a report by Bain & Company, while the government wants EV penetration to hit 40 percent for buses, 30 percent for private cars, 70 percent for commercial vehicles, and 80 percent for two-wheelers.
Affordability remains a key constraint when it comes to mass adoption in a market that is well-known for being price-sensitive. Currently, electric vehicles from Kia, Mercedes, BMW, and Hyundai, among others, position themselves at a higher price point, making them less accessible to a broader consumer base.
“The upfront cost of EVs remains a significant deterrent for many consumers, despite lower operating expenses over time,” adds Sharma of Nomura. “Then there is the paucity of widespread and reliable charging stations contributes to range anxiety, discouraging potential buyers.”
Also read: With MG, JSW wants to create a “Maruti moment for electric vehicles”
What Can Tesla Do?
For the government, getting a company of Tesla’s reputation to set up a base in India means a massive opportunity to announce its entry into the global league of manufacturing, apart from generating jobs. A manufacturer of Tesla’s scale will also bring its supplier base, which is certain to help build an ecosystem in the country, especially a supercharger network.
“Tesla will certainly reshape the market with its charging infrastructure and ecosystem, while adding inspiration and benchmarks for the segment,” adds Gupta. “The existing players will certainly have to rethink their strategy, and while Tesla may be relatively more expensive, localization could lead to cheaper pricing.”
“When it comes to pricing, Tesla can offset any immediate losses with gains in the future, especially from a volumes point of view,” adds Piparsania. “That means, Tesla won’t be very concerned about the pricing for the Indian market. They will certainly bring their best products to India to begin with, to show their tech prowess.”
A man films the interiors of newly launched Mahindra XEV 9e, an electric SUV, during its launch in Chennai, India. REUTERS/Nandan Mandayam
It also plays in Tesla’s favour that Chinese automakers, who have a cost advantage in the global markets, are yet to make significant inroads into India unlike many markets where Tesla sells. Geopolitical tensions between the countries have meant that many Chinese automakers who had made plans to foray into India are now stuck. Only BYD has been selling in India, largely through the import route, with the company choosing to hold on to investments in the country.
The US too, is having a rethink on the electrification journey under Trump. “While the US policy changes may introduce certain uncertainties, India’s steadfast focus on electrification, bolstered by supportive policies and a growing market, positions it well to navigate and potentially capitalise on the evolving global EV landscape,” adds Sharma.
Even then, the domestic competition for Tesla is only expected to become fierce in the coming years, as partnerships get stitched between automakers. Mahindra, for instance, has already tied up with Volkswagen through which the German automaker will supply components of its EV platform, MEB, for Mahindra’s EV platform INGLO. The supply agreement will run over several years and has a total volume of about 50 GWh over its lifetime. The VW Group is currently building three gigafactories in Germany, China, and Spain.
Others such as Tata Motors and Jaguar Land Rover have finalised plans to manufacture EVs in India, while the country’s second-largest automaker, Hyundai and Kia have announced plans to localise their EV battery production, specifically focusing on lithium-iron-phosphate (LFP) cells.
All that means, the start might be the easy part for Tesla, but the journey might just be a little bumpy.