After finalizing its first ever showroom in Mumbai, Tesla has now applied for homologation of two cars – Model Y and Model 3
Tesla’s plans to enter India have been in the works for at least the last 3-4 years. The subsidiary entity, Tesla India Motors and Energy Private Limited, was registered in Bengaluru in 2021. Some of the Tesla models were spotted on road tests as well in India. However, a commercial launch was continually delayed.
Tesla Model Y and Model 3 to be homologated
Things are vastly different in 2025, as Tesla is finally moving towards the launch phase at an accelerated pace. The first showroom has been finalized, hirings are on and now, homologation applications for Model Y and Model 3 have been filed. Both of these have been spotted earlier on road tests in India. Homologation is one of the final steps before launching a new car in India. It applies to all cars, irrespective of whether they are manufactured in India, assembled in India or imported as CBUs.
In India, the Automotive Research Association of India (ARAI) is the centralized agency for conducting homologation of vehicles. A wide variety of tests are performed to ensure that the vehicle meets the quality, safety, performance, emissions and regulatory requirements, as per Indian laws. Once a vehicle passes all the tests, a Type Approval Certificate (TAC) is issued. It is essentially a confirmation that the vehicle is roadworthy and meets all the mandated standards.
While Tesla was earlier planning to manufacture cars in India, the brand will initially focus on taking the CBU route. It will allow Tesla to get a better understanding of consumer sentiments and demand for its cars in India. Later, as the situation evolves across both domestic and international locations, Tesla can think about local manufacturing in India. As of now, Tesla has manufacturing units in the United States, China and Germany. Tesla is building a new manufacturing plant in Mexico, but completion can take a couple of years.
Import duty reduced for EVs
Tesla’s fast progress into the Indian market comes at a time when the government has plans to reduce import duties on specific EVs to 15%. Earlier, this tax was around 70% to 110%. It was a key reason that had resulted in delays in Tesla’s entry into India. Reports indicate that Tesla is pushing for an even more lenient tax system, wherein its EVs would attract zero tax. It remains to be seen if such demands will be accepted.
Tesla could benefit from other policy updates also such as the proposed changes to the domestic value addition (DVA) criteria. The government could also change the minimum value mandated for imported vehicles under the EV manufacturing scheme. Such changes could increase profit margins for Tesla cars sold in India.
But the red carpet being rolled out for specific EVs comes with some terms and conditions. For example, the lower import duties will be applicable only for OEMs that commit to Make In India and invest at least $500 million (approx. Rs 4,340 crore). Such commitments need to be fulfilled within 3 years. These measures will protect the interests of homegrown carmakers that have invested thousands of crores for building their EV portfolio.
