Tesla has begun discussions with the Centre for an investment proposal to set up a car factory in the country, with an annual capacity of as many as 5,00,000 electric vehicles (EVs), a media outlet reported on Thursday.
The prices for the vehicles will start from ₹20 lakh ($24,400.66), the report added.
The billionaire Elon Musk-led company is also looking at using India as an export base as it plans to ship cars to countries in the Indo-Pacific region, the report said, citing government sources.
Tesla did not immediately respond to Reuters' request for comment.
The discussions with the Indian government show a shift in strategy for the US electric car maker.
Last year, talks stalled after the Indian government refused to agree to a request from Tesla seeking lower import taxes on cars, which can be as much as 100 per cent.
India was keen for Tesla to manufacture vehicles locally, but the company said it wanted to export its cars first 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 car and battery manufacturing, Reuters reported.
In a meeting with Musk last month, Indian Prime Minister Narendra Modi pushed the car maker to make a "significant investment" in the country.
India has strong potential for a sustainable energy future including solar power, stationary battery packs and electric vehicles, Musk said after meeting Modi, adding he hopes to bring SpaceX's Starlink satellite internet service to the country as well.