India’s transport minister Nitin Gadkari has said that the country is willing to provide incentives to ensure Tesla’s cost of production is less than in China, if the carmaker commits to building its EVs in the second most populous country in the world.

“Rather than assembling [the cars] in India they should make the entire product in the country by hiring local vendors. Then we can give higher concessions,” Gadkari said in an interview with Reuters.

“The government will make sure the production cost for Tesla will be the lowest when compared with the world, even China, when they start manufacturing their cars in India. We will assure that,” he added.

The bold offer comes several weeks after Tesla registered a company in India earlier this year, with the company expected to begin sales by mid-2021. The Model 3 will reportedly be the brand’s first offering in the country, which will arrive as a fully-imported model. Gadkari has previously said that Tesla will only consider local assembly and manufacturing based on buyers’ response to its cars.

India is aiming to curb pollution in its major cities as well as to boost local manufacturing of EVs, batteries and other components. By having Tesla (and other potential carmakers onboard), the huge market could see an increase in EV uptake in the country and become a major export hub, especially with about 80% of components for lithium-ion batteries being made locally now.

However, there are some issues that India must first deal with to convince Tesla to make its car there, as the country’s EV market is immensely small, with just 5,000 out of 2.4 million cars sold last year being fully electric. The high pricing of EVs and poor charging infrastructure are said to be the reasons for the low demand.

By comparison, Tesla already has a production plant in Shanghai, China (Gigafactory 3), and the country recorded 1.25 million new energy vehicles – including EVs – sold in 2020 out of total sales of 20 million, accounting for more than a third of Tesla’s global sales.

China also has a comprehensive EV policy that mandates companies to invest in the sector, while India is still working on finalising the details of a production-linked incentive scheme for automotive and component makers, as well as for setting up advanced battery manufacturing units.

A recent tightening of emission regulations last year for carmakers is a step forward for India, and the country is looking to enforce stricter fuel efficiency rules from April 2022, which could compel brands to add electric or hybrid vehicles to their line-ups.