According to media reports last week, Tesla CEO Elon Musk was expected to announce a $2 billion to $3 billion investment in India to build a new factory.
Reuters reported that Tesla has also started looking for showroom space in New Delhi and Mumbai.
While there is no official announcement of Tesla’s expansion to India yet, such a strategic move to the Asian country is predicted to boost the earnings of the EV maker as the country’s electric vehicle sector still lacks competition. Reports reveal that only about 5% make up India’s EV sector.
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Speaking on Tesla’s proposed entry to India, MG Motor India’s CEO Emeritus Rajeev Chaba said,
“Competition is limited at this point. Numbers are still constrained because consumers don’t have compelling choices. When India as a market gets attention, more and more players and investments will come in. Tesla will definitely help in developing the ecosystem and some consumers will go for them”.
Also, according to India’s new policy, automakers that invest at least $500 million and set up manufacturing facilities in India within three years, will be eligible to import up to 8,000 EVs that cost $35,000 or more a year, at a lower tax rate. The move is no doubt good news for Tesla, which has been trying to break into the Indian market, and has been looking for lower import duties for years.
Recall that Tesla CEO Elon Musk in 2023, had disclosed that he was incredibly excited about the future of India, adding it has more promise than any large country in the world.
A possible move to India which still has an EV market that is not yet saturated with many players, could significantly impact the earnings of Tesla, as the company has in the past few years faced stiff competition in regions where it operates.
Tesla has seen EV sales grow over the past several years, topping out to a new record of 1.8 million vehicles in 2023. But the company’s profits have suffered thanks to repeated price cuts that started in late 2022.
This forced the EV maker to recently cut prices in some of its major markets, including the U.S., China, and Germany as it struggles with a drop in sales and stronger competition from Chinese EVs.
However, competition in China remains heated, which accounted for 60% of all EV sales last year. Tesla trails BYD as the second-ranked EV seller in the country, while Chinese EV brands Nio and Li Auto are closing in on the U.S. automaker.
Facing an intensified price war in China, Tesla has on several occasions lowered the prices of some of its Models to boost sales, as the region has gone from a tailwind to a major headwind in the Tesla story with competition continually rising.
In its Q1 2024 earnings report, Tesla delivered 386,810 vehicles and produced 433,371, down 8.5% and 1.7% on the year, with sales dropping more than 20% compared with the previous quarter. The company’s profit fell 55% to $1.13 billion in the first quarter from the same year-ago period as a protracted EV price-cutting strategy and “several unforeseen challenges” cut into the automaker’s bottom line.
Notably, Tesla highlighted that the EV adoption rate globally is under pressure and a lot of auto manufacturers are pulling back on EVs and pursuing plug-in hybrids instead. The demand pressure and declining profit margin have led to global layoffs at the company after it announced earlier that it would lay off 6,020 employees in Texas and California. This followed an internal announcement to lay off 10% of its global workforce.
However, Musk emphasized that despite the downward pressure, the company was focused on investing in the future. Specifically, the company is accelerating work on a new vehicle lineup with production expected in early 2025.