Tesla Building A Second Factory In Shanghai Making India Manufacturing Facility Unlikely

Tesla has announced plans for a new production facility in China, right next to its Gigafactory in Shanghai. This new facility will add capacity for 450,000 vehicles to the plant's yearly output. This would position Tesla's China Gigafactory as the hub for exporting its EVs to the world. But this also means it is highly unlikely that the world's most valuable carmaker will ever make its electric cars in India.

Tesla has been using its Shanghai Gigafactory as a hub for exporting electric cars to markets outside China, including the European market. Outside of China, the US and Europe, the major automotive market is India which Tesla hasn't managed to access. In 2021, Tesla created an Indian entity, however, it has been in a logjam with the Indian government which wants it to make its cars in India.

Tesla on the flip side wants to test the waters by importing its vehicles but wants a relaxation on taxes. India has some of the highest import duties in the world for EVs something Elon Musk has ridiculed in the past.

Tesla's facilities in China are critical to its global expansion plans

More recently, India's minister for transport, Nitin Gadkari indicated that the import of Tesla's EV from China wasn't a tenable option. He also said that tax breaks were also out of the question as the government would have to offer those benefits to other automakers like Hyundai and Mercedes which are making their EVs in India.

Tesla has acquired land in the Shanghai Lingang special area which will be an expansion of the gigafactory. In 2021, its Shanghai facility deliveries 484,100 vehicles which also accounted for more than half of 936,000 global deliveries.

While there is no timeline for the expansion, the message is clear, it wants to use its Shanghai Gigafactory as the export hub. That's why it is pushing for tax breaks with the Indian government as its most affordable Model 3 would be rendered highly uncompetitive versus other electric cars in the countries if they were subject to taxes. But this logjam is expected to continue till the Indian government changes its stance which is unlikely considering the hostilities with China.