Tesla Eyes $2-3 Billion Factory Expansion Into India

If Tesla has demand worries as a result of its poor Q1 2024 delivery numbers, it sure isn’t showing it.

Instead the company is reported to be looking to expand even further geographically, with FT reporting this week that Tesla is eyeing India as a potential site for its next electric vehicle factory, with an investment estimate ranging from $2 billion to $3 billion.

The company is set to explore locations in states like Maharashtra, Gujarat, and Tamil Nadu, known for their existing automotive infrastructure. This move aligns with Prime Minister Narendra Modi’s push to strengthen domestic manufacturing, according to CNBC and FT. 

The report notes that last month, India reduced import tariffs on select EVs for automakers willing to invest at least $500 million and initiate local manufacturing within three years, as part of a broader effort to promote India as a manufacturing hub for cutting-edge electric vehicles.

A scheme approved by the Indian government aims to attract investment in manufacturing, facilitating the production of advanced e-vehicles within the country, CNBC and FT wrote. This initiative gained momentum after Modi’s meeting with Tesla CEO Elon Musk in June, where Musk was encouraged to explore investment opportunities in India’s EV sector.

India’s push to boost domestic production aligns with its 2021 approval of a production-linked incentive scheme for automobiles and auto components, backed by a budget of $3.1 billion over five years. This scheme, extended by a year starting January 1, aims to enhance domestic manufacturing capabilities and reduce reliance on imports.

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

Recall, shares of Tesla slumped to start the week after the automaker, now facing stiff competition in China from BYD and new entrant Xiaomi, posted Q1 deliveries that were far below estimates. 

Tesla produced over 433,000 vehicles and delivered 387,000. It marks the first annual Q1 delivery decline for the automaker since 2020. 

Tesla’s exact delivery number for the quarter was 386,810 vehicles, far below Bloomberg estimates of 449.080.