Elon Musk’s Tesla is facing a crisis of confidence. Once the undisputed leader in the electric vehicle (EV) market, the company has seen a sharp decline in sales across key markets, including the United States, Europe, China, and Australia.
The downturn is largely attributed to two factors: Musk’s increasing alignment with far-right politics, which has alienated a significant portion of Tesla’s customer base, and the rise of fierce competition from China’s rapidly growing EV sector. In an apparent bid to counter these challenges, Tesla is making a renewed push into India—one of the last major untapped EV markets.
Tesla’s troubles have been mounting for months. February saw a dramatic drop in sales across its traditional markets, with Germany leading the collapse at 76%, followed by Italy (55%) and other key European markets. Even in the United States, Tesla’s home turf, its market share is slipping as consumers turn to alternatives. Meanwhile, Chinese EV giants like BYD have overtaken Tesla in global sales, solidifying China’s dominance in the EV industry.
The root of Tesla’s problems extends beyond the argument that Musk’s vocal support for far-right political figures in the U.S. and Europe has played a crucial role in turning off large swaths of potential customers. His endorsement of conspiracy theories, controversial remarks on social issues, and antagonistic stance toward mainstream media have led many once-loyal Tesla buyers to reconsider their purchases. This has been particularly damaging in liberal-leaning markets such as California and parts of Western Europe, where Tesla had previously enjoyed strong demand.
Additionally, Musk’s decision to cut Tesla’s marketing budget while pushing cost-cutting measures has raised concerns about the company’s ability to sustain growth. The aggressive price cuts Tesla introduced in 2023 to stay competitive have also backfired, leading to eroding profit margins and investor skepticism about the company’s long-term strategy.
As Tesla’s existing markets become increasingly challenging, India appears to be Musk’s next big bet. But analysts remain skeptical about whether it will be enough to turn the tide.
India’s Untapped Market – But at What Cost?
India, the world’s third-largest automobile market, presents a massive opportunity for any automaker. With the government targeting 30% EV adoption by 2030 and sales of electric cars growing 20% year-on-year, Tesla’s entry seems well-timed. The company has already leased a high-profile showroom in Mumbai, is planning another in Delhi, and is actively hiring for multiple roles across sales, customer support, and product development.
However, despite India’s market size, analysts doubt that Tesla’s expansion into the country will be a game-changer. The biggest challenge lies in the spending power of Indian consumers. Unlike China, where Tesla has built a profitable business by catering to a growing middle class with strong purchasing power, India’s car market remains overwhelmingly price-sensitive.
In 2024, EVs accounted for just 2.5% of the 4.3 million cars sold in India, with most of the demand concentrated in the sub-$10,000 segment dominated by local giants like Tata Motors and MG Motor India. Tesla’s cheapest model, the Model 3, is estimated to cost around $40,000 in India, excluding tariffs—a price far beyond the reach of the average Indian car buyer. Luxury EVs priced above $20,000 made up only 6.6% of India’s total EV sales last year.
Adding to the challenge is India’s economic disparity. According to a study by venture capital firm Blume Ventures, 90% of India’s population has no disposable income for non-essential goods. In contrast, China’s vast middle class has supported a robust demand for premium EVs, allowing Tesla to scale its business there.
Some analysts see India as a large market but warn that large markets don’t always translate to profitability, and Tesla needs high-income consumers to break even, and those numbers are much smaller in India than in China.
Can Tesla Replicate Its China Success in India?
Tesla’s success in China has been largely driven by its ability to localize production. The company built its Shanghai Gigafactory in record time, enabling it to cut costs and benefit from favorable government policies. India, however, presents a different challenge.
While the Indian government has relaxed import duties for premium EV manufacturers willing to invest at least $500 million and set up local production within three years, Tesla’s ability to scale in India remains questionable. Unlike China, where the government actively supports foreign EV makers with subsidies and infrastructure investment, India has lagged in EV charging infrastructure and supply chain development.
Additionally, Tesla faces strong domestic competition. Tata Motors already holds a commanding 60% market share in India’s EV space, with JSW MG Motor India and Mahindra & Mahindra also aggressively expanding their footprint. These companies offer EVs at significantly lower price points, making Tesla’s high-end positioning a potential disadvantage.
Tesla’s cars also face design challenges in India. Most Tesla models have low ground clearance, which is unsuitable for India’s often uneven and pothole-ridden roads. Unless the company customizes its vehicles for the Indian terrain, it could struggle with widespread adoption.
Geopolitics and Musk’s Trump Connection
One factor that could work in Tesla’s favor is India’s strained relationship with China. Unlike other Asian markets where Chinese automakers are establishing dominance, Tesla has a clearer path in India due to government restrictions on Chinese investments. In 2023, India rejected BYD’s proposal for a $1 billion EV plant, underlining a protective stance toward foreign competition.
Musk’s perceived alignment with U.S. President Donald Trump may also help smooth Tesla’s entry into India. The Modi government, keen to strengthen ties with Washington, has been extending certain policy relaxations to Tesla, which some analysts see as a strategic move to appease both Musk and the U.S. administration.
However, Trump’s recent comments criticizing India’s EV tariffs have complicated matters. The former president has threatened reciprocal trade measures if India does not lower its import duties further, potentially putting Tesla in the middle of a geopolitical tug-of-war.
A High-Stakes Gamble
Tesla’s expansion into India comes at a crucial moment. With its valuation down by $800 billion, declining sales in key markets, and growing skepticism about Musk’s leadership, the company is under immense pressure to find new growth avenues.
However, analysts warn that expanding to new markets alone will not solve Tesla’s deeper issues. The company must address the reputational damage caused by Musk’s political entanglements, regain lost customer trust, and fend off intensifying competition from Chinese EV makers.
However, for Musk, India represents both an opportunity and a risk. If Tesla succeeds, it could open the door to a massive new consumer base. But if it fails, it would only reinforce the growing narrative that Tesla’s best days are behind it.
