After years of anticipation, Tesla on Tuesday finally opened its first showroom in India, in Mumbai’s Bandra-Kurla Complex. The only model listed on Tesla India’s site is the Model Y, available in two variants—priced at Rs 59.89 lakh and Rs 67.89 lakh (ex-showroom). On-road prices go up to Rs 69.15 lakh. A second location in Delhi-NCR is expected to follow.
But the road that brought the electric vehicle (EV) giant to Indian shores was anything but linear.
There is no factory yet, no formal manufacturing commitment. What we’re seeing is a cautious, calculated retail debut shaped by a complex mix of policy deadlock, strategic hesitation, competitive pressure, and geopolitical tug-of-war.
This isn’t just a story about a car company entering a market. It’s about a country protecting its domestic industry, a company safeguarding its global margins, and two powerful political economies trying to reconcile competing interests.
Elon Musk has long voiced concerns about India’s steep import duties on fully built vehicles, which historically ranged from 70% to 100%. On April 23, The Financial Express reported that such tariffs would nearly double the price of a Tesla in India, creating “a lot of anxiety among the customers.”
Tesla CFO Vaibhav Taneja noted that these tariffs weren’t benefiting Tesla but “going to the local government,” making India “a very hard market.”
Tesla’s interest in India dates back to at least 2015, but for nearly a decade, nothing materialised. India’s import duty structure remained a sticking point, levying up to 100% tax on completely built imported vehicles.
In 2021, Musk tweeted that India’s duties were the “highest in the world by far,” and reiterated Tesla’s preference to test demand before committing to local production.
"We want to do so, but import duties are the highest in the world by far of any large country! Moreover, clean energy vehicles are treated the same as diesel or petrol, which does not seem entirely consistent with the climate goals of India," Musk said.
"But we are hopeful that there will be at least a temporary tariff relief for electric vehicles. That would be much appreciated."
But Indian officials held firm: no duty cuts unless Tesla agreed to manufacture locally.
That stance was shaped by the government’s Make in India push. Officials repeatedly stressed that policy concessions would require local investment.
"We welcome Tesla to India. India is a big market with all types of vendors present here. If it manufactures locally in India, it will get concessions," Union Minister for Road Transport and Highways Nitin Gadkari said in 2023.
On the other hand, domestic EV makers like Tata Motors and Mahindra & Mahindra, which had already invested billions into Indian operations, strongly opposed relaxing import rules for a foreign rival.
"It should be a level playing field and investing in India is important," Anish Shah, Managing Director & CEO, Mahindra Group, told Reuters at the 2024 World Economic Forum, without naming Tesla.
"Our approach is essentially to create a stronger industry in India, and not to be in a situation where manufacturing is done outside India, and India just becomes an importer of products."
"Our approach is essentially to create a stronger industry in India, and not to be in a situation where manufacturing is done outside India, and India just becomes an importer of products."
According to media reports, this divergence may have led to stalled negotiations and even the last-minute postponement of Elon Musk’s planned India visit in 2024. As reported by Reuters, Musk was expected to announce a $2–3 billion investment for a local facility and meet Prime Minister Narendra Modi.
According to media reports, this divergence may have led to stalled negotiations and even the last-minute postponement of Elon Musk’s planned India visit in 2024. As reported by Reuters, Musk was expected to announce a $2–3 billion investment for a local facility and meet Prime Minister Narendra Modi.
The cancellation was widely seen as a sign that the two sides had failed to reach an agreement.
India changes the rules
The impasse began to shift in March 2024, when India unveiled a new Electric Vehicle policy aimed at attracting foreign investment with conditional tariff relief.
According to a Ministry of Heavy Industries notification, companies willing to invest a minimum of ₹4,150 crore (roughly $500 million) to build local manufacturing units would be allowed to import up to 8,000 EVs per year at a reduced 15% customs duty, down from 70–100%.
To qualify, vehicles must cost at least $35,000, and companies must begin local production within three years of approval. They must also meet localisation targets: 25% by year three, 50% by year five.
Tesla showed some early interest but didn’t follow through. A senior official in the Ministry of Heavy Industries told PTI that while Tesla attended the first stakeholder consultation, it skipped subsequent rounds.
“So far, they have not shown interest,” the official said.
Union Heavy Industries Minister H.D. Kumaraswamy was more blunt: “They are more interested only to start showrooms. They are not interested in manufacturing in India,” he said, The Economic Times reported.
Retail first, factories later (maybe)
Instead of committing to manufacturing, Tesla is testing the waters with a retail-first strategy. It has secured a trade certificate from the Andheri RTO, allowing it to import vehicles, conduct test drives, and sell EVs in India, PTI reported.
After the first showroom opens, a second outlet in Delhi-NCR is expected by the end of the month, according to Times of India. These showrooms will function as experience centres where customers can view, customise, and place orders for Tesla vehicles.
According to Bloomberg, deliveries are slated to begin in late August. Customers will be able to configure and order their EVs starting next week, a person familiar with the launch plan told the news agency.
The company’s India debut is anchored by the Model Y rear-wheel drive, shipped from Tesla’s Shanghai Gigafactory. Five units were declared at approximately ₹27.7 lakh ($32,270) each, according to customs data reviewed by Bloomberg News.
Given India’s steep 70% import tariff on fully built cars priced below $40,000, plus local levies, the final price tag for Indian customers will be significantly higher than the vehicle’s U.S. retail price of around $46,630.
How well the Model Y, the world’s best-selling EV, performs in this environment will be a key indicator of whether premium EVs can thrive despite India’s protectionist policies.
Margins are shrinking, competition is rising
According to an Economic Times report from April, Tesla’s gross margin in Q1 2025 stood at 16.3%, down from 17.4% a year earlier.
Revenue came in at $19.34 billion for the January–March quarter, well below the $21.11 billion expected, underscoring weak demand and pricing pressure.
Deliveries dropped 13% during the same period, marking the steepest year-on-year decline in nearly three years, as per Reuters. The slump was driven by rising global competition, delayed product refreshes, especially for the Model Y, and growing backlash over Elon Musk’s political alignment, particularly his role as an adviser to US President Donald Trump.
In China, once one of Tesla’s strongest markets, the company’s EV share has slid to 7.6% in the first five months of 2025, down from 10% last year and 15% at its 2020 peak. Rivals like BYD and Xiaomi are capturing market share with feature-rich, competitively priced alternatives.
Globally, Tesla sold 336,681 vehicles in Q1, down from 386,810 the previous year.
In that context, betting billions on India, a market known for high regulatory friction and uncertain EV demand, may not be the safest play just yet.
Trump weighs in
Tesla’s India story also has a US angle. US President Donald Trump has criticised American firms for shifting operations abroad.
Speaking about Tesla’s India ambitions earlier this year, Trump said, “Every country in the world takes advantage of us, and they do it with tariffs... It is impossible to sell a car, practically, in, as an example, India,” as reported by ET.
In an interview with Fox News, he added that a Tesla plant in India would be “unfair” to American workers. “Now, if he built the factory in India, that’s okay, but that’s unfair to us. It’s very unfair.”
Still, Musk moved ahead. Tesla began hiring in India earlier this year. Roles ranged from store managers to engineers. The company also registered a subsidiary in Bengaluru and opened an engineering hub in Pune.
So what now?
Tesla’s India play is exploratory. The company is betting that there’s a segment of Indian buyers who will pay a premium for the brand, even with high import costs.
But the bigger questio--will Tesla manufacture in India?--remains open.
Local giants like Tata Motors and Mahindra & Mahindra have already invested heavily and lobbied hard against import duty relaxations. Still, Tesla’s entry and the new EV policy may spark more competition and innovation in India’s still-nascent EV market.
EVs accounted for just 2.5% of car sales in 2024, according to The Hindu. The government wants that number to reach 30% by 2030. For Tesla, that’s a huge opportunity, if the policy, infrastructure, and economics line up.
For now, the July 15 Mumbai showroom marks the beginning of Tesla’s India chapter. It took nearly a decade of lobbying, policy deadlock, and geopolitical friction to get here.
The question now is: how far is Musk willing to go from here?
Source Name : Economic Times