Tesla eyes India venture to tackle global supply-chain turmoil and geopolitical crisis

Tesla’s pivot to India comes just after the United States and European demand for EVs softened. Global supply chains are being ‘rethought’ in response to shocks. An independent analyst has noted in the context that Tesla’s Shanghai gigafactory still relies on Chinese fabs for mature-node chips, but “escalating geopolitical tensions and cost increases” are forcing the company to reconsider its sourcing strategy.

Meanwhile, India’s car market, recognised as the world’s third-largest at present, has seen overall vehicle sales rise (4.3 million in 2024) even as EVs remain in a smaller slice (only 2.5 per cent of sales).

Tesla is not the only one tapping the Indian market. Foreign automakers are scrambling to tap this lesser-explored EV sector. Mercedes-Benz recently launched several local EV models (including a made-in-India EQS SUV) and sees growing uptake among affluent buyers. BMW, likewise, is rolling out more EV models and expects electrics to form a bigger share of sales this calendar year. It is a bonus point in this stance that Mercedes and BMW combined sold well over 50,000 electrified cars in India in 2022-24, far outpacing Tesla’s absence.) In Germany, by contrast, EV registrations actually plunged, and Tesla’s own German sales fell 41 per cent year-on-year, highlighting the regional unevenness of the EV boom.

India’s fledgling EV market is growing fast (nearly 100,000 EVs sold in 2024, up 20 per cent year-over-year), aided by government incentives, a large pool of younger buyers, and models from both local (Tata, Mahindra) and global brands (BYD, VW, Hyundai). India’s government has set ambitious targets (30 per cent of auto sales by 2030) and is courting foreign investment – it recently slashed EV import duties to 15 per cent under its new policy in hopes of luring companies like Tesla.

Thus, Tesla’s sudden venture in India, within days of CEO Elon Musk’s teleconference with Prime Minister Narendra Modi on February 13, 2025, Tesla advertised 13 new job openings in India (showroom managers, service and support staff in Mumbai/Delhi). Musk even told Modi on the call that “India should have electric cars like every other country” – and later publicly confirmed he was “looking forward to visiting India later this year!”. Prime Minister Modi similarly tweeted that he and Musk discussed collaboration in “technology and innovation” (and observers believe renewable energy and space tech were also on the agenda).

These developments come as Tesla’s own business is under strain. The company’s automotive gross profit margin has plunged from roughly 32-33 per cent in early 2022 to about 16 per cent by Q4 2024 – roughly half its earlier levels – as Tesla has repeatedly slashed prices to boost sales. Its two best-selling models (Model 3 and Y) now start in the ~USD 40,000 range, down from average prices above USD 50k a few years ago. Global EV competition is also heating up as China’s BYD sold 1.76 million EVs in 2024 (up 12.1 per cent) – nearly matching Tesla’s 1.79 million – by focusing on lower-cost, high-volume models. Even Xiaomi (formerly a smartphone maker) is making waves, launching the USD 30k SU7 luxury sedan and a USD 114k performance variant aimed squarely at Tesla and Porsche.

Facing squeezed margins, slowing sales in its core markets and intense Chinese competition, Tesla is looking beyond its traditional strongholds. India, by virtue of its vast auto market, supportive policies and a growing chip-making ecosystem, has suddenly emerged as a tempting “China+1” destination.

For Tesla, embedding parts of its supply chain (and perhaps future assembly or EV sales) in India could hedge geopolitical risks and plug into one of the world’s fastest-growing tech-industrial hubs. Conversely, India stands to gain from Tesla’s interest, bringing capital, expertise and integration into a global EV value chain. What began as an exploratory outreach to Indian chipmakers may prove to be a key piece of Tesla’s evolving global strategy – and a sign of India’s rising clout in high-tech manufacturing.