Mumbai, Apr. 5: US electric car maker Tesla Motors will send a team to scout locations in India for a proposed $2-3 billion electric car plant this month, according to a report.

“Tesla would send a team from the US by late April to study sites for the plant, focusing on states with existing automotive hubs, including Maharastra and Gujarat in the west and Tamil Nadu in the south,” said a report by the Financial Times.

The move comes weeks after the Commerce Ministry released a new electric vehicle (EV) policy easing duty for a limited number of EV imports for manufacturers setting up facilities in India with a minimum investment of Rs 4,150 crore.

The policy allows the import of completely built-up (CBU) cars at a 15 per cent import duty, however, the maximum number of four wheeled EVs allowed to be imported at the reduced duty rate has been capped at 8,000 per year.

The policy is being seen as targeted at facilitating Tesla’s entry into India as the carmaker had been lobbying for lowering import tariffs as a precondition to investing in manufacturing operations in the country.

India is currently the world’s third largest automobile market and one of the fastest growing automotive markets in the world. The current market size of the automotive sector is Rs 12.5 lakh crore and the sector is expected to cross Rs 24.9 lakh crore by 2030. The automotive sector contributes over 7.1 per cent to India’s GDP.

While some automakers have plants in Haryana state, Tesla might also scout potential sites around the capital. Tesla did not respond to a request for comment, the FT report said.

“Modi pushed Musk to invest in India when the two met during a visit to the US by the prime minister last year. Musk said then that the electric-car manufacturer would ‘be in India…?as soon as humanly possible’,” the FT report said.

The government has earmarked billions of dollars’ worth of government subsidies to promote manufacturing, including in critical industries such as EVs, where India’s geopolitical rival China has a strong lead, the report said. “Tesla has told Indian officials it is considering building a smaller car in the proposed new factory than its current models, which would be priced at less than $30,000. It could then sell the model in India and export to south-east Asia, the Gulf, Africa, and southern and eastern Europe,” the report said.

The carmaker is developing a cheaper vehicle to go on sale late next year, but has not yet said where the car — which has been dubbed “Model 2” by Tesla observers — will be manufactured, it said.

“The potential expansion of Tesla’s global factory network comes as growth in global EV sales slows. The group is also building a plant in Mexico that is expected to come online in 2026,” it said.

“One of the people familiar with Tesla’s plans said the company was considering beginning with a $2-3 billion investment in the Indian car plant. Suppliers would invest billions of dollars more, making this one of India’s biggest inward foreign investments,” it said.  The company expected the factory to reach production of as many as 500,000 cars a year when it reached full capacity, FT said quoting sources.

“Tesla might later also look at setting up its own battery plant, following the “gigafactory” model it has followed at its plants in California, Texas, Berlin, and Shanghai, where suppliers have set up shop next to or near the mother plant, the report said.-Agencies