By Girish Linganna
Elon Musk has announced that he is excited about his upcoming meeting with Prime Minister Narendra Modi later this month in the Indian capital. This news comes amid speculation that Tesla is exploring locations for a new manufacturing plant in India. Musk shared his enthusiasm on the X platform, stating his anticipation for the visit.
A report by the news agency, Reuters, has stated that the Tesla CEO is set to meet Modi in New Delhi during the beginning of the April 22 week and that Musk, on his visit, is likely to be accompanied by other company executives. The meeting is sure to be held in the last week of the current month, but Musk has not shared any details about it.
The two had last connected in New York in June 2023, when Musk had said, “I’m confident that Tesla will be in India… as soon as humanly possible.” And, since then, Tesla has been actively encouraging the Indian government to reduce import taxes on electric vehicles (EVs). This comes as the company considers establishing a manufacturing base in India. Tesla has vehicle manufacturing plants outside the US in Berlin and Shanghai.
There are strong signs that Elon Musk is visiting India to unveil a major project that has been in the planning stages for years. It is expected that Tesla will invest between $2 billion and $3 billion to establish a factory aimed at producing affordable electric cars, possibly called Model 2, a now-defunct, entry-level model, which may be priced at about Rs 25 lakh. Tesla’s cheapest and newest Model 3 sedan now retails in the US for about $39,000.
Last year, Tesla had approached the Indian government seeking a slash of duty to import its vehicles in the country. Earlier, in 2022, Musk had gone on record saying that Tesla would not manufacture its products unless it had permission to first sell and service its cars in India. A year even previous to that, Musk had hinted that his company could set up a manufacturing unit in India if it tasted success with imported vehicles in the country. Tesla had a keen desire to launch its vehicles in India, but Musk had lamented that India’s import duties were the highest in the world by far among any large country.
On March 15, India announced a new EV policy that permits the import of fully assembled, or completely built-up (CBU) electric cars that have a minimum cost, insurance and freight value of a minimum of $35,000 (Rs 29.2 lakh) at a reduced import duty of 15% for five years. This offer is available to companies that invest at least $500 million in setting up local manufacturing. Normally, India imposes an import duty of up to 100% on fully assembled cars. A Vietnamese EV company, VinFast, has shown interest in this policy, but there has been no commitment from Tesla yet, as reported by the Economic Times.
According to a recent study from Counterpoint Research, reported by Mint, EV sales in India are expected to surge by 66% this year, fuelled by state subsidies and enhancements in infrastructure. Several Indian states, including Maharashtra, Gujarat and Telangana, have reportedly offered attractive land deals to Tesla for setting up a manufacturing plant.
Tesla’s potential entry into India could significantly support the country’s ‘Make-in-India’ initiative, which recently attracted another major brand, Apple, to start manufacturing iPhones locally. At a time when Tesla is facing—such challenges as falling sales, dropping stock prices, low investor confidence and a lack of fresh ideas—amid increasing competition from US and European companies, as well as aggressive Chinese automakers, India offers substantial opportunities for growth and expansion.
Tesla experienced a significant decline in US sales in the first quarter of 2024. The company, led by Elon Musk, delivered 386,810 vehicles from January to March, marking a nearly 9% decrease from the 423,000 vehicles sold in the same period the previous year. This drop comes as global competition in the EV market increases, cutting for the quarter Tesla’s profit estimates, which has already seen a drop of more than half in a year. The company is also poised for a second straight year of falling yearly earnings and financial experts expect Tesla will take another two years, at least, until 2026 to cross its 2022 level of profitability.
The Economic Times quotes DataTrek Research co-founder Nicholas Colas telling Bloomberg a week previously that it was not yet clear where Tesla’s next leg of growth will be—whether EVs or any of the other projects it has in the pipeline. “If you’re going to command a premium multiple, you’ll have to have great earnings visibility, or a fantastic story on why those earnings will show up in the future. Tesla has neither at the moment.”
Colas’s comments ride on the back of a Reuters report quoting information gathered from various sources that Tesla has cancelled the inexpensive car it has been promising for a long time, which investors have been looking forward to, to spur its growth as a mass-market automaker.
According to sources, Tesla has started manufacturing right-hand drive vehicles at its Germany factory and plans to export them to India later in 2024. India’s EV market is currently small, but expanding, with Tata Motors leading the sector. In 2023, EVs accounted for only 2% of total car sales. However, the government aims to increase this to 30% by 2030.
This PM-Mask meeting is taking place in the thick of Lok Sabha elections which begin on April 19 and end on June 1 this year. If any announcement is made after the meeting about Mask’s big investment in India, that will be a sort of electoral bonanza for the Prime Minister Narendra Modi and his party the BJP. This Mask visit will certainly have a big impact on the young voters who will be impressed by the present PM’s ability to attract foreign investments for high tech areas. PM is expected to discuss about the use of AI in India in collaboration with the Tesla owner. (IPA)
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