An official announcement may be made during the Vibrant Gujarat Global Summit in January, as per an anonymous source due to the confidential nature of the discussions, said the report, citing the people.
Gujarat, Maharashtra, and Tamil Nadu are being considered as potential locations for the factory, given their well-established ecosystems for electric vehicles and exports.
According to the report, Tesla is expected to make an initial investment of approximately $2 billion in the plant, and the company aims to increase its procurement of automotive components from India to potentially reach $15 billion.
Tesla also wants to explore local battery production in India to bring down costs, stated the report.
After a year-long deadlock, Tesla and India, the world's third-largest automobile market, resumed discussions in May.
While Elon Musk has criticised India's sky-high import taxes and electric vehicle (EV) policies, India cautioned Tesla against selling cars in the country that are manufactured in China.
However, India is now mulling a reduction in import taxes for global EV manufacturers for a period of five years, provided these companies make a firm commitment to establishing local manufacturing units, according to reports.
The report added that Tesla's India-manufactured vehicles may be priced as low as $20,000 in the local market.