Tesla Sets Eyesight on India's Middle Class, But Sudden Tariffs Force Cautious Approach
During Tesla's first-quarter earnings call, the company reported a significant 71% drop in profits year-on-year, but the discussion also highlighted India's potential as a key market for expansion. While Tesla did not provide a specific timeline for entering the Indian market, executives acknowledged the challenges posed by the country's protectionist policies.
Vaibhav Taneja, Tesla's chief financial officer, explained that the current tariff structure in India imposes a 70% tariff on imported cars, along with a 30% luxury tax. This means that the cost of a Tesla vehicle could be nearly double its original price, which creates a barrier for potential buyers. Taneja emphasized that these high tariffs lead to consumer anxiety, as buyers feel they are paying excessively for the vehicles, with the government benefiting from the taxes rather than the company itself.
His comments followed a meeting between Tesla CEO Elon Musk and Indian Prime Minister Narendra Modi in February, where they discussed potential collaborations in technology and innovation. Analysts suggest that Tesla may be preparing to enter the Indian market this year, as the company has started hiring for various roles and has been spotted testing the updated 2025 Model Y near Mumbai.
Although Tesla has not officially confirmed its entry this year, Taneja mentioned the company's interest in reaching India's large middle-class segment. Reports indicate that Tesla is considering launching a more affordable model priced between Rs 20–25 lakh to appeal to Indian consumers, especially when compared to its U.S. models, which range from Rs 42,490 (approximately Rs 36.26 lakh) to $99,900 (around Rs 85.25 lakh) before tax credits or incentives.
Taneja remarked, “As I mentioned, we are actively working on this, and entering the Indian market would be a fantastic opportunity due to the country's large middle class, which we aim to engage. However, the current challenges create some tension that we are trying to navigate.”
These developments indicate a growing momentum towards a possible collaboration. In February, CEO Elon Musk met with Prime Minister Narendra Modi in the U.S., sparking renewed speculation about Tesla's plans for India. Musk is also anticipated to visit India later this year.
While the prospect of entering the Indian market is exciting, Musk and his team face the immediate challenge of addressing the company's declining financial performance. In the latest quarter, which marked Tesla's weakest since Q3 of 2021, the company reported a 9% year-on-year decrease in revenue, totaling $19.34 billion, while operating income plummeted by 66% to $399 million. Net income fell 71% year-on-year to $409 million, with vehicle sales revenue dropping by 20%. This decline occurred alongside a 13% drop in Tesla's deliveries for the first quarter, even as overall EV sales increased by 7% during the same period.
In light of these disappointing quarterly results, Musk announced plans to reduce his involvement with the Trump administration and the Department of Government Efficiency (DOGE), stating that he would dedicate “a day or two per week to government matters” starting in May, allowing him to refocus on Tesla.
