India’s journey towards becoming a global hub for electric vehicle (EV) manufacturing is set to receive a significant push as the government prepares to open applications under its new EV manufacturing policy. Announced by Heavy Industries Minister HD Kumaraswamy on June 2, 2025, this move is expected to attract investments from reputed global EV manufacturers and promote India as a manufacturing destination for cleaner, sustainable vehicles.

India’s EV Manufacturing Policy: An Overview

The EV manufacturing policy, first announced in March 2024, is part of India’s ambitious plan to cut emissions, reduce dependence on fossil fuels, and create a thriving electric vehicle ecosystem. The policy includes key incentives such as a reduced import duty of 15% on electric cars priced $35,000 or more, conditional upon the manufacturer investing at least Rs 4,150 crore (around $500 million) to establish a local manufacturing facility within three years.

Additionally, under this scheme, companies will be allowed to import up to 8,000 EVs annually at the lower duty rate, balancing between encouraging local manufacturing and allowing market flexibility through imports. This policy framework is designed to attract marquee players such as Tesla and other global EV giants to make India a vital part of their manufacturing and sales network.

Tesla’s Approach to the Indian Market

Despite the government’s push, Tesla’s entry into India appears focused initially on setting up showrooms and selling imported electric vehicles rather than manufacturing locally. Minister HD Kumaraswamy indicated that Tesla is unlikely to begin vehicle production in India soon, instead prioritizing establishing a strong retail presence.

Earlier this year, Tesla secured showroom spaces in Mumbai and Delhi, with the Mumbai showroom located in the prestigious Maker Maxity at the Bandra Kurla Complex — a prime commercial area. Tesla signed a five-year lease starting February 16, 2025, paying a rent of approximately Rs 32 lakh per month for a spacious 4,003 square feet area, enough to showcase their electric vehicle range effectively.

Tesla has also been actively recruiting for jobs related to their Indian rollout, suggesting that the company is building its operational and service capabilities in the country. However, the company remains cautious about manufacturing locally, partly due to concerns over India’s historically high import duties and regulatory environment.

International Context and Policy Impact

Tesla’s decision not to manufacture in India immediately may also be influenced by international factors. For instance, in February, then US President Donald Trump commented that if Tesla built a factory in India to bypass tariffs, it could be viewed as “unfair” to the US, reflecting the geopolitical considerations that sometimes impact multinational corporate strategies.

India’s EV manufacturing policy aims to change the calculus for companies like Tesla by offering competitive incentives and lowering import duties for those willing to invest heavily in local production. This could, in the medium to long term, pave the way for Tesla and others to establish manufacturing units if the business environment becomes more favourable.

The Road Ahead for India’s EV Sector

The government is expected to open the application portal for the EV manufacturing scheme as early as June 2025, with the application window extending till March 15, 2026. This timeline provides global and domestic EV makers sufficient time to prepare proposals and investment plans.

India’s EV policy is strategically important as it coincides with the global transition towards electric mobility and aligns with India’s commitments to climate change and sustainable development goals. By incentivizing local manufacturing and easing import norms, India hopes to become a global player in electric vehicle production, battery manufacturing, and related infrastructure.

Tesla’s current strategy of importing vehicles and establishing showrooms could be seen as a cautious first step, allowing the company to gauge market dynamics and consumer acceptance before making significant capital investments in manufacturing. Other manufacturers might follow different paths depending on their strategic priorities and India’s evolving regulatory landscape.

In conclusion, India is poised to accelerate its electric vehicle industry with the imminent launch of its EV manufacturing policy application process. While Tesla’s local manufacturing plans remain on hold, its focus on establishing a retail presence shows confidence in India’s growing EV market potential. The policy’s incentives and import duty reductions aim to attract major global players, driving investment, job creation, and a cleaner transport future in India.

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