Tesla Motors may establish a Gigafactory in India at some point. “Given high local demand, a Gigafactory in India would probably make sense in the long term,” Tesla CEO Elon Musk said in a tweet.

Tesla May Set Up A Gigafactory In India

Tesla CEO and Indian PM talked of batteries

In September, Indian Prime Minister Narendra Modi visited Tesla’s factory in San Francisco during his visit to Silicon Valley. Modi’s visit attracted a lot of media attention, and many started making educated guesses about Tesla setting up a car manufacturing facility in India just like many other companies that have accepted Modi’s proposal for investing and establishing operations in the country.

Musk chose China for establishing an auto factory, however, he indicated that he might consider establishing a gigafactory in India for manufacturing lithium-ion batteries. Tesla is working on setting up its first such factory in Nevada, which is expected to be completed by 2017. India’s tough taxation policies are keeping Musk and Tesla away from selling cars in India.

“Auto import duties are prohibitively high. Hoping for a special category for EVs [electric vehicles]. Most of our discussion [with Modi] was on batteries,” Musk said in a tweet.

Why India for a gigafactory?

Tesla’s lithium-ion batteries are capable of recharging and storing energy, and if the U.S. firm chooses to mass-produce them in India, then its costs could reduce further and it may be able to increase mass adoption. India is presently making a move towards renewable energy sources, and solar power is the most important for now. Tesla’s plans would mesh nicely with the country’s initiatives. India aims to produce 100 gigawatts of solar power by 2022 and also hopes to attract investments worth $100 billion over the next seven years in the sector.

India holds many competitive advantages for Tesla. The majority of India’s rural population does not have access to electricity, while several parts of the country are dealing with daunting challenges for grid connectivity. At the same time, big Indian cities are facing pollution problems. The remedy to both is available through Tesla.

In terms of competition, there is no indigenous electric car available in India that can compete with Tesla except the Reva from Mahindra & Mahindra. In comparison, BYD Auto dominates the electric and hybrid car market in China, while many more electric cars are set to be released in the Chinese market soon. This makes India a better choice.