The Indian commerce minister said on Wednesday that electric car manufacturer Tesla Inc. (TSLA.O) has ambitions to build up a plant in India, which comes on the heels of the announcement that the company intends to purchase components from India valued between $1.7 and $1.9 billion this year.

According to a story from Reuters from a month ago, top officials from Tesla met with the minister to discuss the company’s interest in developing a factory in India that would make a low-cost electric vehicle (EV) with a starting price of $24,000. This would be around 25% less expensive than Tesla’s current entry-level model and be intended for sale on the Indian market and export.

“Tesla last year already bought $1 billion worth of components from India… this year their target is $1.7-$1.9 billion,” stated Indian Commerce Minister Piyush Goyal at an auto convention.

“I have no doubt that electric vehicles are the way of the future. It is something that we need to work hard to bring in.”

With its burgeoning population and increasing environmental awareness, India presents a lucrative opportunity for automakers in the EV sector. The Indian government has been actively promoting clean energy and electric mobility, offering incentives to manufacturers and buyers alike. Tesla recognizes the immense potential of the Indian market and is making strategic moves to establish a strong presence.

In 2020, Tesla registered its Indian subsidiary, Tesla India Motors, and Energy Private Limited. This move signaled the company’s intention to tap into the Indian market, a process that gained momentum in 2021 with the announcement of Tesla’s Gigafactory in Karnataka.

Tesla’s Gigafactory in Karnataka is set to be a game-changer in the Indian automotive industry. With an estimated investment of $1 billion, this massive manufacturing facility will produce both batteries and electric vehicles. The Gigafactory will cater to domestic demand and serve as an export hub to neighboring countries.

Tesla plans to source parts worth $17-19 billion locally in India to achieve its ambitious goals. This supply chain localization is a strategic move aimed at reducing costs, improving production efficiency, and complying with Indian regulations. By partnering with local suppliers, Tesla aims to create a robust ecosystem for EV manufacturing.

Tesla can significantly reduce logistics costs and import duties by sourcing parts locally. This cost efficiency will allow Tesla to offer competitive pricing for its EVs, making them more accessible to Indian consumers.

Proximity to suppliers means shorter lead times and faster production cycles. Tesla can respond more quickly to changing market demands and ensure a steady supply of vehicle components.

India has stringent regulations regarding local sourcing, especially for foreign companies. By adhering to these regulations, Tesla can avoid potential legal hurdles and establish a smoother operating environment.

Tesla’s investment in India has far-reaching implications for the local economy. It is expected to create thousands of jobs directly and indirectly through its manufacturing, supply chain, and service operations. Additionally, the growth of the EV industry will drive the development of ancillary industries such as charging infrastructure and renewable energy.