Tesla sets sights on India’s middle class, but steep tariffs force cautious approach

EV maker Tesla’s first-quarter earnings call, following a 71% year-on-year profit plunge, was notable not just for the dismal numbers but for a rare spotlight on India. While the company stopped short of confirming a timeline, it acknowledged India as a key market it is actively exploring. The company executives stated that India’s protectionist policies remain a potential hurdle for the EV giant’s entry.

“We’ve been working on getting into India. India is a very hard market and especially the current tariff structure with India is that any car which we send is subject to 70% tariff, and also a 30% luxury tax on it. So, the same car which we were sending is like 100% more expensive than what it is,” said Vaibhav Taneja, chief financial officer, Tesla, when asked a question about expansion across emerging markets such as India during the earnings call on April 22.

The Centre, in the Union Budget 2025, reduced the Basic Customs Duty on imported cars priced above $40,000 from 125% to 70%, and scrapped the 10% Social Welfare Surcharge. Despite these changes, Taneja noted that high tariffs still create hesitation among potential buyers, who see a significant outlay required to purchase a single Tesla.

“So that creates a lot of anxiety, people feel (like) they're paying too much for the car and by the way, we're not getting the money, the local government is getting the money, and that's why we've been very careful trying to figure out when is the right time,” he added.

Taneja’s remarks came just days after Tesla CEO Elon Musk held discussions with Prime Minister Narendra Modi on potential collaboration in technology and innovation in February.

Analysts speculate Tesla may enter the Indian market this year, as the company has begun hiring for back-end operations and customer-facing roles in February. Supporting this, the updated 2025 Model Y was recently spotted testing near Mumbai.

While Tesla has not confirmed whether it will happen this year, senior executive Taneja noted that the company aims to tap into India’s vast middle-class market, a segment Tesla is actively targeting. According to a Frost & Sullivan report, Tesla is considering launching an affordable model priced between ₹20–25 lakh to cater to Indian consumers. For comparison, Tesla models in the U.S. typically range from $42,490 (₹36.26 lakh) to $99,900 (₹85.25 lakh), before any tax credits or incentives.

“Like I said we are working it's a great it would be a great market to enter because India has a big middle class which we would want to tap in and that is the market which we want to be in but again these kind of things create a little bit of tension which we're trying to work around,” Taneja added.

These developments are significant and point to growing momentum toward a potential collaboration. In February, CEO Elon Musk met Prime Minister Narendra Modi in the U.S., reigniting speculation around Tesla’s India plans. Musk is also expected to visit India later this year.

Musk promises to refocus on Tesla

While Tesla’s potential entry into India remains a key point of interest, the immediate challenge for Musk and his team is addressing the company’s declining financials. For the quarter, its weakest since Q3 of 2021, Tesla reported a 9% year-on-year drop in revenue to $19.34 billion, while operating income plunged 66% to $399 million. Net income plunged 71% year-on-year to $409 million, with revenue from vehicle sales dropping 20%. This comes as Tesla’s deliveries for the first quarter fell 13%, while overall EV sales rose 7% in the same period.

On the back of poor quarterly results, CEO Elon Musk announced plans to scale back his involvement with the Trump administration and the Department of Government Efficiency (DOGE), stating he would spend “a day or two per week on government matters” starting May, and refocus on Tesla.