Tesla to Build Electric Vehicle Factory in India with 4 Trillion Won Investment

American electric vehicle company Tesla is set to invest up to $3 billion (approximately 4.0431 trillion KRW) to establish an electric vehicle factory in India and intensify its market penetration.

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According to major foreign media on the 3rd (local time), Tesla plans to scout for a factory site to establish an Indian plant worth between $2 billion and $3 billion (approximately 2.6954 trillion to 4.0431 trillion KRW). The southwestern states of Maharashtra, Gujarat, and Tamil Nadu, which are current automotive manufacturing hubs, are considered strong candidates. Tesla will send a related team to India by the end of this month to conduct a site survey for the factory.

Tesla is considering producing small electric vehicles priced under $30,000 at the Indian factory. These vehicles would not only be sold locally but could also be exported to Southeast Asia, the Middle East, Africa, Eastern Europe, and Southern Europe. Currently, Tesla is developing a low-cost model called 'Model 2' (tentative name) aimed for sale next year. The production location of Model 2 has not been disclosed.

This investment is expected to become the largest foreign direct investment (FDI) in India. A source explained that with additional investments, the annual production capacity of the Indian factory could reach up to 500,000 units. Similar to its factories in California, Texas, Berlin, and Shanghai, Tesla may introduce the 'Gigafactory' model and consider establishing its own battery plant.

Notably, Tesla's move comes shortly after the Indian government announced a conditional reduction in import tariffs. The Indian government has significantly lowered electric vehicle import tariffs to 15% for manufacturers investing over $500 million and starting production in India within three years. Previously, electric vehicles priced over $40,000 faced a 100% tariff, and those under $40,000 faced a 70% tariff.

Major foreign media analyzed that Tesla's investment will bolster Indian Prime Minister Narendra Modi ahead of the general elections. During his visit to the U.S. in June last year, Modi met with Tesla CEO Elon Musk and urged investment in India.

For Tesla, which is struggling due to declining demand and competition from Chinese electric vehicles, entering the Indian market is necessary. Tesla's electric vehicle deliveries in India decreased for the first time in four years in the first quarter of this year. Ashwin Ambekar, an analyst at Canalys, stated, "India's new electric vehicle policy, by providing incentives, will be a significant opportunity for Tesla to establish a strong foothold in India."

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