Elon Musk's push to bring Tesla to India comes amid the EV giant's mounting global challenges - shrinking profit margins, slowing sales, and tough competition from Chinese automakers.
With India emerging as a major auto market, Tesla sees an opportunity to expand its footprint. Political roadblocks, high import duties, and scepticism from even Musk's allies, including US President Donald Trump, make the road ahead anything but smooth.
Here's why Musk wants to enter India and what stands in his way.
Tesla's financial performance
In 2022, Tesla reported a gross profit margin of 30 per cent. But by the last quarter of 2024, this margin declined to below 15 per cent, the lowest ever recorded.
Concurrently, the average sale price of Tesla cars decreased by approximately one-third, reaching nearly $40,000.
In 2024, all-brand electric vehicle (EV) sales in Germany - a country housing one of Tesla's Gigafactories - plummeted by 41 per cent. In China, despite Tesla achieving record sales of 657,000 units last year, the company faced formidable competition from local manufacturers such as BYD and Xiaomi.
Globally, while Tesla sold 1.79 million cars (a 1.1 per cent decrease), BYD's sales surged by 12.1 per cent, totalling 1.76 million vehicles, Reuters reported.
Tesla's entry into the Indian market
India, as the world's third-largest auto market after China and the US, presents a significant growth opportunity for Tesla. The country's EV adoption is in its early stages, offering a relatively untapped market. Recognising this potential, premium brands like Mercedes and BMW have already commenced EV assembly in India.
In response, Tesla has accelerated its efforts to establish a presence in India. Following a meeting between Elon Musk and Prime Minister Narendra Modi in Washington, on February 13, Tesla initiated hiring processes within a week, posting job openings for various positions in the country.
The company has also identified locations for showrooms in New Delhi and Mumbai.
Challenges
Tesla's entry into India is not without challenges. The Indian government imposes high import duties on vehicles, a policy designed to protect domestic manufacturers such as Tata Motors and Mahindra. Elon Musk has previously criticised these steep tariffs, advocating for more favourable terms to facilitate Tesla's market entry.
US President Donald Trump has expressed concerns regarding Tesla's potential manufacturing presence in India. In an interview, Trump said that if Tesla were to establish a factory in India to circumvent tariffs, it would be "unfair" to the US. "Every country in the world takes advantage of us, and they do it with tariffs... It is impossible to sell a car, practically, in, as an example, India," he said.
Despite Tesla's ongoing discussions with the Indian government, analysts believe it's too early to predict its market influence. Pricing remains a significant challenge compared to domestic automakers like Tata Motors, M&M, and Maruti Suzuki.
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