Modi, Musk and Mystery: Tesla's Secret Strategy
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FEBRUARY 2025
Few names in the global electric vehicle (EV) industry command as much attention as Tesla. Elon Musk’s company has revolutionized the automobile sector, yet its expansion into new markets often comes with political and economic complexities.
India is no exception.
Despite widespread anticipation, Tesla’s entry into India is shrouded in controversy, policy debates, and economic scepticism.
Is Tesla's arrival truly a game-changer, or is it merely a strategic move to offload unsold inventory?
More importantly, how does this development align with India’s broader industrial and economic goals like Atmanirbhar Bharat – Make in India?
A Special Exemption for Tesla?
India has long imposed high tariffs on imported cars, particularly luxury and high-end vehicles. The current tariff for imported cars stands at 100%, a rate that significantly protects domestic manufacturers.
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...Tesla’s entry into India is shrouded in controversy, policy debates, and economic scepticism
However, the Indian government has announced a drastic reduction—to just 15%—for cars that are produced or assembled within the country.
This policy shift has been widely interpreted as an open invitation for companies like Tesla.
During Prime Minister Narendra Modi’s 2025 visit to the U.S., where he met Elon Musk amid the larger context of the controversial Modi-Trump deal, Tesla’s India entry was reportedly greenlit.
But this raises pressing questions: Will Tesla’s vehicles be subject to the 100% tariff like other imports, or will they enjoy the reduced 15% rate?
If so, what justifies this preferential treatment?
The very optics of Modi’s meeting with Musk, along with a high-profile delegation that included India’s Foreign Minister, have raised eyebrows.
Why was such high-level political engagement necessary for what is, at its core, a business deal?
The situation demands scrutiny, and as more details emerge, the deeper implications for India's trade policy and domestic industry will come under sharper focus.
Tesla’s Real Market Influence: Beyond the Hype
Despite Tesla’s formidable reputation, its actual market performance presents a different picture. In the U.S., its home turf, Tesla controls only about 4% of the total vehicle market.
Globally, while Tesla may be present in over 50 countries, it sold just 1.8 million cars in 2023—a respectable number, but nowhere near market dominance.
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...Will Tesla’s vehicles be subject to the 100% tariff like other imports...
What many fail to acknowledge is that Tesla vehicles are significantly overpriced, making them a less attractive option in advanced economies - both Europe and the U.S.
In fact, thousands of Tesla cars manufactured in Germany remain unsold across European markets.
The rise of the Chinese EV giant BYD has compounded this issue.
Offering superior quality at lower prices, BYD has taken the European EV market by storm, forcing the European Union to impose protective tariffs on Chinese EVs—ironically, to shield Tesla.
This EU’s protectionist move exposes the hypocrisy of so-called free-market principles.
On the other hand, BYD, now operating in 70 countries, sold over 4.2 million vehicles in 2024—more than four times (4x) Tesla’s sales.
In India alone, BYD has already expanded into 17 states, presenting a formidable challenge to any new entrant, including Tesla.
India’s “Status Trap” and Tesla’s Strategy
India's luxury car market—and by extension of its broader consumer culture—suffers from what can be termed a “status trap “.
The allure of global brands often outweighs practical considerations, leading consumers to prioritize brand prestige over utility and affordability.
In the new craze gripping Indian, they are buying depreciating consumer goods, on loan, even when there are loan sharks around.
Musk appears to be leveraging this psychological phenomenon to push Tesla’s unsold inventory into the Indian market.
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...thousands of Tesla cars manufactured in Germany remain unsold...
Speculatively, he may also be using his alliance with former U.S. President Donald Trump to exert pressure on the Indian government.
If true, this raises serious concerns about political deal-making and whether India's economic policies are being shaped to favour specific foreign business interests over domestic growth.
Interestingly, Tesla has yet to establish a factory in India but has posted job openings for 12 full-time job positions.
While this does not indicate long-term commitment, it does reflect Tesla’s tentative approach—possibly waiting to see if regulatory conditions become more favorable.
The Trump Factor: A Manufacturing Dilemma
Under Trump’s “America First” policy, U.S. manufacturers have been encouraged to bring jobs back from China and other nations, including India. This presents an inherent contradiction for Tesla.
If Musk sets up a Tesla plant in India, he (Musk) would be creating jobs for Indians instead of Americans, contradicting Trump’s economic agenda.
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...Indian, they are buying depreciating consumer goods, on loan...
An alternative strategy could be securing lower tariffs for Tesla’s German-made vehicles, thereby exporting unsold European inventory to India.
While this remains speculative, the reality will become clearer once Tesla starts shipping cars to India.
The Future of EVs: Is Tesla Still a Priority?
From a technological perspective, EVs are still evolving.
Over the next five years, thousands of mid-sized and large companies are expected to enter the market, making Tesla’s early-mover advantage increasingly irrelevant.
Consider the case of VinFast, a Vietnamese automaker that has already entered the Indian market.
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...(Musk) would be creating jobs for Indians instead of Americans, contradicting Trump’s economic agenda
Who would have imagined that a Vietnamese brand "VinFast" formed just 8 years ago in 2017, could challenge American giants like Ford and domestic stalwarts like Tata Motors?
Given the growing competition, Musk appears to be shifting his focus. Tesla is no longer his primary project; instead, he seems more interested in capturing India’s internet market through his Starlink initiative.
This raises further questions about Tesla’s long-term commitment to Indian manufacturing.
The Fate of Indian EV Brands
India’s “Make in India” and “Atmanirbhar Bharat” initiatives are facing an existential crisis. With global players like BYD, Tesla, Ford, Mercedes, BMW, Audi, and even Vietnam’s VinFast
aggressively entering the Indian market, what will happen to homegrown brands like Tata Motors, Mahindra, and Maruti Suzuki?
Tata Motors has sold 200,000 EVs in India, including 60,000 in 2024.
However, even at this pace, it is unlikely to match Tesla’s global sales within the next decade. Mahindra has sold 100,000 EVs but has significant ground to cover.
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Who would have imagined that a Vietnamese brand "VinFast" formed just 8 years ago in 2017, could challenge American giants like Ford and domestic stalwarts like Tata Motors?
Meanwhile, Ford—which had exited India—has now announced plans to restart its manufacturing operations. They are jumping into the Indian EV market – which already seems to be crowded.
The Big Question: Is Indian Government Protecting Indian Industry?
The most pressing question remains: How is Prime Minister Modi’s government safeguarding Indian manufacturers, maintaining its “Atmanirbhar Bharat” vision, and navigating the tariff war with the U.S.?
Just days ago, Modi attended the Madhya Pradesh Investors' Summit, yet he made no mention of the U.S.-India tariff war debate or its implications for Indian jobs.
Hence, can Indians expect Tesla also to get same silent entry into the market - that Harley-Davidson got when its import tariffs were reduced from 150% to 30%?
Does India Even Need Tesla?
Beyond policy and trade wars, a fundamental question arises: Does India even need an expensive luxury car brand like Tesla?
With only 8% of Indians owning a car and just 3% of taxpayers falling into the income bracket that could afford Tesla, the priorities should be different.
Instead, India urgently needs better roads, bridges, and an efficient, affordable public transport system to serve the 92% of citizens who rely on it daily.
At a time when India’s economic policies appear increasingly influenced by mighty US-Trump political pressure, these questions demand urgent attention.
As Tesla’s India story unfolds, one thing is clear:-
The real challenge is not whether Tesla will succeed, but whether India's policymakers will prioritize the country’s economic self-reliance over foreign corporate interests.
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