While several reports talk about Tesla scrapping India manufacturing plans, there is no official confirmation of this at the moment
Tesla is currently using the CBU route from its manufacturing facility in Shanghai, China to sell its EVs in India. Plans for local manufacturing have not progressed due to various reasons. Latest reports indicate that Tesla has canceled its plans to manufacture in India. Let’s see the details.
Tesla cancels India manufacturing plan
Several factors have been highlighted that have reportedly led Tesla to cancel its manufacturing plans in India. For example, the existing local supply chain and industrial base do not seem ready to support a Tesla Gigafactory. There is uncertainty about policy decisions that may affect business operations. Limited sales capacity in the Indian market is another reason why Tesla may have decided to cancel its manufacturing plans in India.
Global overcapacity could be another reason why building a new Tesla factory in India may not be the right strategy. As global EV sales have performed poorly in recent times, Tesla’s existing gigafactories are operating at about 60% capacity. Since there are signs of inventory buildup and major uncertainties in the global geopolitical scenario, building a new factory would be quite counterproductive.
Another reason for Tesla’s hesitation to manufacture in India could be related to high import duties. Tesla likes the idea of zero import duties, as it suits its business interests. The Indian government offered a huge reduction in import duty by only 15%. However, this came with a condition of a minimum investment of $500 million for local production within three years. Tesla never agreed to this and instead chose the CBU route for its operations in India.
It is also easy for Tesla to notice that demand for its cars in India is limited. From July 2025 to April 2026, when Tesla began operations in India, cumulative sales have been around 383 units. Sales potential has been constrained due to high import duties. Even if the government agrees to lower import duties for Tesla cars, there is unlikely to be any dramatic change in sales.
The way forward for Tesla’s India operations
Given the current global challenges and uncertainty, Tesla may continue to go the CBU route for the Indian market. It is possible that opening new outlets in more cities and introducing new models could help increase sales. It is also worth noting that apart from India, Tesla has also stopped its plans for Mexico Gigafactory.
Globally, Tesla’s home market, the United States, remains its largest individual market. The market share in the electric segment is in the mid 40%. Even in America, Tesla is facing competition from brands like Ford, General Motors and Hyundai-Kia. The Model Y remains the best-selling Tesla car in the United States.
China is Tesla’s second-largest market, where it faces competition from brands like BYD, Li Auto and Xiaomi. The third-largest market for Tesla is Europe, where the company sees a jump in sales as early as 2026. However, competition from Chinese players is increasing.
