Tesla Explores Contract Manufacturing in India, Engages Multiple Automakers!

Tesla is in discussions with several Indian car manufacturers to explore the possibility of contract manufacturing arrangements in India. According to industry sources, the U.S. automaker has initiated preliminary talks with both a Japanese automaker and an Indian carmaker to consider utilizing their spare production capacity for manufacturing its vehicles. These talks are still in the early stages, and a final agreement will depend on mutually agreed commercial terms.

Tesla’s strategy involves leveraging existing manufacturing infrastructure rather than setting up a new greenfield operation in the first year. Initially, Tesla’s models will be imported as completely built units (CBUs), and the company intends to avoid the high capital expenditure that would be required for a new manufacturing plant.

The decision to pursue contract manufacturing comes after considering the Indian government’s proposed electric vehicle (EV) policy, which requires a minimum investment of $500 million to qualify for a lower 15% import duty on cars, with a cap of 8,000 units annually. Instead, Tesla has opted for the contract manufacturing route, which allows the company to reduce its capital expenditure while achieving quicker time-to-market.

Geopolitical developments, including the recent leadership change in the U.S. with President Donald Trump’s aggressive stance on promoting domestic manufacturing, may have influenced Tesla’s decision. Experts suggest that given the potential for lower duties on imports, setting up a manufacturing plant in India may not be the most cost-effective move at this stage.

This approach reflects Tesla’s strategy of adapting to market dynamics while remaining cost-conscious and maintaining flexibility in its global operations.