Tesla is preparing to introduce its most economical electric vehicle to date, tentatively named Model 2. The American electric vehicle manufacturer has revived its plans for the Indian market following Prime Minister Narendra Modi's visit to the United States, where he engaged in discussions with Tesla CEO Elon Musk. Notably, subsequent to this meeting, Tesla began advertising for various positions in India, which has reignited discussions regarding the company's entry into the Indian market. Reports indicate that the anticipated electric vehicle could be priced around ₹21 lakh, positioning it as the most affordable offering from Tesla thus far.

Tesla Model 2 in India gradually nearing reality

The Tesla Model 2 in India is gradually becoming a tangible prospect. Amid ongoing speculation regarding Tesla's launch in India, recent reports suggest that the company is poised to unveil an affordable electric vehicle tailored for the local market. In November 2023, HT Auto reported that this budget-friendly Tesla model would be manufactured at the company's Berlin GigaFactory. However, developments since then have significantly altered the landscape.

In March 2024, the Indian government revised its electric vehicle policy to encourage investments. Additionally, the Union Budget for 2025 aimed to foster an environment conducive to attracting Tesla. Recently, the government also reduced import duties on electric vehicles from 110 per cent to 70 per cent to entice foreign manufacturers.

Simultaneously, Tesla has renewed its interest in establishing operations in India. Reports suggest that the Model 2, expected to be priced around $25,000 (approximately ₹21 lakh), is set to be launched in India. The electric vehicle manufacturer is reportedly planning to commence sales of its electric cars in the first half of this year.

Tesla's $25,000 EV project to be rejuvenated

Some reports have indicated that Tesla may initiate its operations in India with electric vehicles such as the Model 3 and Model Y. However, there are also uncertainties regarding the potential revival of the company's affordable electric car initiative. The Model 3, currently Tesla's most accessible electric vehicle, is priced at approximately ₹36 lakh in Germany, and the cost in India is expected to be significantly higher due to import duties.

Tesla has been considering the Indian market for several years, but previously identified high import tariffs as a significant obstacle. In 2024, the Indian government revised its electric vehicle policy. The amendment stipulates that automakers establishing a local manufacturing facility with a minimum investment of $500 million will qualify for a 15 per cent customs duty exemption for five years. Should Tesla adhere to this regulation, it could prove advantageous for the company to introduce its existing models, including the Model 3, Model Y, Model X, Model S, and Cybertruck, to India under the reduced customs duty.

Moreover, India's electric vehicle sector is experiencing rapid growth, with an annual increase of approximately 20 per cent. Although it is still smaller than the Chinese market, it offers a substantial opportunity for Tesla, particularly as the company encounters declining sales in the United States.

Both India and the United States are working to enhance bilateral trade, with a goal of doubling commerce to $500 billion by 2030. As both nations aim to boost trade by increasing exports of industrial products, Tesla's entry into the Indian market appears to be a strategic and viable decision.

Tesla Model 2 is a reworked Model Y?

Prior to being set aside, the highly anticipated and most affordable Tesla electric vehicle was tentatively referred to as the Model 2 or Project Redwood. The much-discussed Tesla Model 2 is essentially a simplified version of the Tesla Model Y. During several quarterly investor calls, CEO Elon Musk confirmed that the development of a new, more economical vehicle is still on schedule for a 2025 launch.

Musk indicated that this vehicle would be a more compact variant of the Model Y. Consequently, it is expected to be a compact electric SUV, slightly larger than the Cybercab. It may feature a larger battery pack, which would provide a greater range compared to the Cybercab. The vehicle is anticipated to be equipped with battery packs starting at 54 kWh, offering an estimated range of approximately 400 kilometres on a full charge.

Upon its release, the Tesla Model 2 is expected to compete with several prominent electric vehicles in India, including the Mahindra XEV 9e, Mahindra BE 6, BYD Atto 3, Tata Curvv EV, Hyundai Creta Electric, and MG ZS EV, among others.

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