The Tesla Model S all-electric sedan at the car's unveiling in Hawthorne, California. Photo: Robyn Beck/AFP

Tesla, which sold half a million of the world’s best-selling electric cars last year, plans to enter the affluent segment of the rapidly growing Indian market.

The Elon Musk-led manufacturer has 17% market share of the global plug-in segment and is making rapid strides selling what experts describe as vehicles of the future. Concerns over depletion of fossil fuels and increasing automobile pollution is luring many buyers to the fume-free and efficient alternatives.

Tesla is in talks with five Indian states to set up a factory for production, offices, stores and a research and development center. The short-listed states are Maharashtra, Karnataka, Gujarat, Andhra Pradesh and Tamil Nadu. All have production facilities of a global car maker.

Tesla has hired a global consulting firm for this job. Tumkur in Karnataka is one of the sites it has selected. Earlier this week the company made an application with the Registrar of Companies to begin setting up an office and factory in India.

The initial price of a car according to the company’s website is likely to be around 6 million rupees ($81,000), the price typically of a premium vehicle in India. Tesla aims at tapping an estimated market of 85 million Indians who can afford a premium car.

“At the moment, due to the high tariffs in India, Tesla cars will be expensive,’’ automobile writer Eva Fox wrote on the company’s website.

“Nevertheless, if the company has its own production, it will reduce the cost of cars to an acceptable level. Thus, at some point, Tesla cars may become affordable for the middle class as well.’’

The company plans to initially import Completely Built Up (CBU) cars since it doesn’t have production or assembly facilities in India. Tesla aims to sell 2,500 units a year at first, all of which will be imported.

Elon Musk arrives to visit a Tesla construction site in Gruenheide near Berlin in Germany. Photo: Odd Andersen/AFP

By setting up its own production facilities Tesla aims to bring down the cost of its electric cars for the middle class, estimated at between 150 and 200 million people. The country added four million cars last year. India sold 17 million two-wheelers in the year ended March 2019, down from 21 million in the earlier year.

US-based Tesla has offices across Europe, Russia, China and Australia, and in Dubai and Amman. It plans to set up production facilities in Brazil to cater for South American markets.

Tesla, which aims to produce 150,000 Model 3 sedans from its $2 billion Shanghai plant, sold 10,160 units in China in March last year, or about a third of its annual sales.

Tesla’s Model Y with its lower price attracts buyers to take a test drive in Shanghai, China. Photo: AFP

In October last year, Musk said the company plans to enter the Indian market by 2021, and software to help customers specify their requirements would be launched at the beginning of 2021. This was later confirmed by India’s Transport Minister Nitin Gadkari.

Tesla is entering the Indian market as local manufacturers Tata Motors, Maruti Suzuki India, and Mahindra plan to launch new electric vehicles. Jaguar I-Pace is expected to begin selling its electric SUV in March this year, at an estimated cost of 10 million rupees ($137,000).

Almost 53% of sales of Tata Motors-owned Jaguar Land-Rover’s cars were electric vehicles in the quarter ended December 31.  Automobile manufacturers are seeking lower taxes from the Indian government and looking to the February 1 national budget for changes.