Tesla CEO Elon Musk and President Donald Trump shared an interesting dialogue regarding the automaker’s potential entry into the Indian market, which could require the construction of a new Gigafactory in the country.
For the past several years, Tesla and India have attempted to come to terms on an agreement that would see the EV maker bring its vehicles to the country permanently. There have been several sticking points in the negotiations, which have delayed Tesla’s plans.
Tesla has wanted to test demand by shipping vehicles from its Gigafactory Berlin plant in Germany to India.
This would not be an adequate way to assess whether India is an ideal market for Tesla because the country applies 100 percent import duties to imported vehicles, doubling the price of the car in question.
India has agreed to reduce or even eliminate the import duties for Tesla under one condition: it commits to building a factory in the country. This would essentially eliminate the need for the demand test, though.
This is where Tesla and India have been held up. However, recent discussions between Musk and Prime Minister Narendra Modi have resulted in Tesla initiating hiring efforts for Sales and Service advisors in India.
But things got interesting during an interview with President Trump and Musk yesterday, especially in regards to Tesla’s potential plans to build a Gigafactory in India.
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Musk and Trump both discussed the high import duties on imported vehicles in India, which Tesla will likely need to use a Gigafactory in the country to avoid.
President Trump seems more in tune with the idea of Tesla sending American vehicles to India and using a reciprocal tariff strategy to force the country to eliminate its duties.
The back-and-forth went like this:
Musk: The tariffs are like 100 percent import duty.
President Trump: The tariffs are so high —
Musk: Yeah.
President Trump: — they don’t want to — now, if he [Musk] built the factory in India, that’s okay, but that’s unfair to us. It’s very unfair. And I said, “you know what we do?” I told Prime Minister Modi yesterday — he was here. I said, “Here’s what you do. We’re going to do — be very fair with you.” They charge the highest tariffs in the world, just about.
Media: 36 percent?
President Trump: Oh, much, much higher.
Musk: It’s 100 percent on — auto imports are 100 percent.
President Trump: Yeah, that’s peanuts. So much higher. And — and others, too. I said, “Here’s what we’re going to do: reciprocal. Whatever you charge, I’m charging.”
The interesting bit about President Trump stating that Tesla building a factory in India is “unfair to us. It’s very unfair” seems to be a point of potential disagreement between the two.
It’s nothing that can’t be worked out, but it seems there could be a bargaining point between Musk, President Trump, and Modi.
Musk wants to get Tesla’s vehicles in India because it is such a large market and it could be a massive boost to the company’s annual delivery totals in the coming years. It has to be at the right price and at the right time.
Modi wants Tesla in India, too, but this will only happen if it can boost the economy. India has a very hellbent focus on domestic manufacturing through its “Make In India” campaign, which is why import duties are so high.
Trump wants Tesla to continue building vehicles in the U.S. to bolster his plans that would provide a resurgence to domestic manufacturing. He is fine with Tesla operating in India, but only if the U.S. sees a benefit, and not Tesla exclusively.
This will likely prolong what seemed to be an almost guaranteed deal between Tesla and India.
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