Tesla is discussing an investment proposal with the Indian government to set up a factory with an annual capacity to produce about half a million electric vehicles, the Times of India reported on Thursday (Jul 13), citing government sources.

The company, led by billionaire Elon Musk, is also looking at using India as an export base to ship cars to countries in the Indo-Pacific region, the report said.

The starting price for the vehicles will be 2 million rupees (S$32,297), the report added, which is more than double of India’s cheapest EV, MG Comet, and half a million costlier than Tata Nexon EV, the top-selling electric car in the country.

Last year, Tesla’s India entry plans were stalled after the country’s government refused to lower import taxes on its cars. The country levies as much as 100 per cent import tax on electric vehicles.

India was keen for Tesla to manufacture vehicles locally, but the company said it wanted to export its cars first to the country so that it could test the strength of demand.

In renewed efforts to enter the domestic market with a change of stance, Tesla held discussions in May with officials about incentives being offered by the government for its cars and battery manufacturing, Reuters had reported.

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The Indian commerce and industry ministry is leading the talks this time and hopes to put together a “good deal”, while maintaining a level-playing field as talks now involve both local manufacturing and exports, the local media report added.

In a meeting with Musk last month, Indian Prime Minister Narendra Modi pushed the car maker to make a “significant investment” in the country.

The commerce and industry ministry, Tesla and Musk did not immediately respond to Reuters’ requests for comments.REUTERS