Opinion
Tesla needs India more than India needs Tesla
Summary
- The electric-vehicle maker faces slowing sales growth, while India’s EV market, though tiny, is growing rapidly.
It's fairly certain that Elon Musk will meet one on one with Prime Minister Narendra Modi this month. Musk posted on X on Thursday that he’s set to meet Modi, and Reuters reported, citing unnamed sources, that the meeting will take place in New Delhi on 22 April. If the meeting does happen, it will probably lead to Tesla announcing a manufacturing plant in India.
Tesla, the world’s most profitable automaker, has been in hot water of late. China’s BYD Auto overtook it briefly to become the world’s largest electric carmaker in 2023.
Tesla warned investors this January to expect “notably lower" growth in sales even as it works to launch a next-gen vehicle in 2025. Then, on 2 April, it reported 8.5% fewer car deliveries globally in the first quarter than it did a year ago. Insufficient demand and heat from competitors has meant that the company now sells much fewer EVs than it produces.
Fewer Tesla cars now qualify for tax credits in the US owing to the stringent conditions on the sourcing of battery materials. Serial price cuts have eroded its once super-high profit margins but not stoked demand for its EVs.
This has Wall Street worried, and Tesla has lost a third of its market value since the start of the year. It remains the world’s most valuable automaker, but Musk is no longer the world’s richest person.
Tesla has been eying India as it looks for new export markets, and has been lobbying New Delhi for lower import tariffs on its EVs. It had partial success last month, when the government gave in and announced lower import tariffs as part of a quid-pro-quo policy that requires car companies to commit to invest at least $500 million and begin manufacturing in India within three years. Meeting these conditions will qualify them for a concessional duty of 15%, down from 70-100% (depending on the import price). Carmakers that meet these requirements will be allowed to import up to 8,000 EVs that cost $35,000 or more every year.
The government said in the February 1 interim budget that it wasn’t touching tax rates, and that all proposals would have to wait until the Lok Sabha polls were completed and a new government was formed. However, it announced the new import tariffs for EVs just a few weeks later. The timing suggests that Modi is keen for Tesla to announce its investment in India in time for the polls.
Musk, the wily business head, probably saw the opportunity to leverage the elections to open up the Indian market for unsold Teslas at concessional import duties. Tesla is scheduled to announce its first-quarter earnings on 23 April, when he will probably look to deliver the good news to Wall Street.
India’s EV market is still small (less than 3% of all cars sold in 2023 were electric cars) but growing. Just three firms – Tata Motors, MG Motors, and Mahindra & Mahindra – account for more than 90% of the market.
While Maruti Suzuki is expected to enter the EV market soon, some of the world’s biggest automakers already sell EVs here, including Volvo, BMW, MG Motors and BYD. Hyundai has sold more than 1,400 units of the IONIQ 5, which costs more than ₹46 lakh, since its launch in January 2023.
Clearly, a struggling Tesla needs India’s booming EV market more than India needs Tesla.
