While Tesla appears to be focusing on establishing a market presence through showrooms rather than manufacturing in India, several other global automakers have expressed keen interest in the country's electric vehicle (EV) manufacturing scheme. According to recent statements by Minister of Heavy Industries H.D. Kumaraswamy, Mercedes-Benz, Volkswagen (including Skoda), Hyundai, and Kia are among the companies that have formally shown interest in setting up EV production in India.
This development follows the Indian government's introduction of a flagship EV policy in March 2024, designed to attract major players to the Indian market. The policy offers reduced import duties on electric vehicles in exchange for commitments to invest in local manufacturing. Specifically, companies can import up to 8,000 EVs annually at a significantly lowered duty of 15% – down from the standard 70% - if they invest at least ₹4,150 crore (approximately $500 million) to establish local production within three years. This scheme is expected to remain active until March 15, 2026, with applications opening soon.
The interested automakers must also commit to increasing domestic value addition over time, reaching 25% within three years and 50% within five years. Investments must be directed towards manufacturing facilities, machinery, research and development, and other eligible infrastructure, excluding land costs. A portion of the total investment, up to 5%, can be allocated to charging infrastructure.
Despite finalizing a showroom space in Mumbai and hiring personnel in India, Tesla is reportedly not considering local manufacturing at this stage. Tesla's CEO, Elon Musk, has previously expressed concerns about India's high import duties, which he views as a barrier to the company's expansion in the country.
India's EV market is currently relatively small, accounting for about 2.5% of all cars sold in 2024. Factors such as high prices and a limited charging network have deterred potential buyers. However, the market is projected to grow significantly, driven by more affordable EVs, an expanding charging infrastructure, and a shrinking price gap between traditional vehicles and EVs.
The Indian government has set an ambitious target for EVs to comprise 30% of total passenger vehicle sales by fiscal year 2030, supported by subsidies, financing options, and infrastructure development. S&P Global Mobility estimates that India's 2024 passenger EV production increased by 22.5% year-over-year to approximately 125,500 units. Total electric passenger vehicle production in India is expected to surge to approximately 1.33 million units by 2030, accounting for about 20% of total passenger vehicle production in the country.
The India electric vehicle market size was valued at USD 8.49 billion in 2024 and is projected to grow at a CAGR of 40.7% from 2025 to 2030. This growth is fueled by government initiatives and rising consumer awareness about environmental sustainability. Key players in the Indian EV market include Tata Motors, Mahindra Electric, Ola Electric, and Hero Electric. Tata Motors dominates the electric passenger vehicle segment with models like the Nexon EV, while Ola Electric and Hero Electric lead the two-wheeler market.
The government has also introduced initiatives like the PM Electric Drive Revolution in Innovative Vehicle Enhancement (PM E-DRIVE) scheme, with a budget of USD 1.3 billion, to accelerate the transition to electric mobility. The two-wheeler segment currently dominates India's electric vehicle market, commanding approximately 92% market share in 2024, driven by the affordability and convenience of electric scooters and motorcycles in urban areas.
