FT said Tesla sent a team for a $2-3bn plant
India’s lowered tariffs on imported electric vehicles spur Tesla to expand in India
Tesla is facing challenges in EVs and a shrinking market share in China
Will Indian market entry be key to return?
The electric vehicle company Tesla is gearing up to move strategically into the Indian market. Amid a slump in electric vehicle demand and increased competition with Chinese companies, Tesla’s stock price is also plummeting. There is growing interest in whether entering the Indian market could capitalize on new opportunities for the company.
The Financial Times (FT) reported on the 3rd (local time) that Tesla will this month send a team to scout locations in India for a proposed $2bn-$3bn electric car plant, according to two people with direct knowledge of the electric vehicle company’s plans. This quickly responds to the Indian government’s measure to lower import tariffs on higher-priced imported EVs.
On the 15th of last month, the Indian government drastically slashed the tariff on imported electric vehicles to 15% for manufacturers committing to invest a minimum of $500 million and start producing electric vehicles within three years. Previously, India has applied a 100% tariff on imported electric vehicles priced over $40,000 and a 70% tariff on those priced under $40,000. Electric vehicle companies like Tesla have been appealing that the tax burden is too heavy to enter the Indian market, advocating for tax reduction in exchange for investment. Tesla is considered one of the biggest beneficiaries of India’s policy to lower import car tariffs.
Potential locations for Tesla’s new electric car factory include Maharashtra, Gujarat, and Tamil Nadu in southwest India, where existing auto manufacturers are based. If a factory is established in this region, it is also expected to be advantageous for exports. Tesla plans to produce affordable models in India for local sales while leveraging exports to diversify its market reach, such as Southeast Asia, the Middle East, Africa, Southern Europe, and Eastern Europe.
Tesla has also reportedly told Indian officials that they are considering building a small electric car priced under $30,000 at the new Indian factory. The FT commented, “Tesla investment would be a major boost for Prime Minister Narendra Modi’s government ahead of a general election that begins this month.”
For Tesla, entry into the Indian market represents a crucial opportunity amidst challenges elsewhere as well. Tesla has faced stiff competition from low-cost electric vehicles in China and a slowdown in demand. According to Bloomberg and other sources, Tesla’s market share in China fell significantly from 10.5% in the first quarter of last year to 6.7% in the fourth quarter. Additionally, Tesla’s vehicle delivery volume in the first quarter also decreased by 8.5% compared to the same period last year, to 386,810 units. This is the worst performance since the third quarter of 2022, falling short of market expectations (457,000 units). In this atmosphere, Tesla’s stock has fallen by more than 30% this year. Dan Ives, an analyst at Wedbush Securities, said, “This is probably one of the most challenging periods for Musk (CEO) and Tesla in the last four or five years.”
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