Why Elon Musk is going long on India

Elon Musk's now-postponed visit to India was scheduled to take place at a time when Tesla is facing a dip in sales in the United States and China, evidenced by recent layoffs affecting 10 per cent of its workforce.

Elon Musk’s recent courtship of India signals a significant shift in his global strategy, but is it a calculated business move or a geopolitical gambit?

With investments in Tesla, Starlink, and X (formerly Twitter), Musk’s interest in India is multifaceted, spanning electric vehicles, satellite Internet, and social media. However, behind the façade of economic opportunity lies a complex game of survival and scale.

Of course, India is his new love, over the past China fascination. It’s simply about business and money. Musk's now-postponed visit to India was scheduled to take place at a time when Tesla is facing a dip in sales in the United States and China, evidenced by recent layoffs affecting 10 per cent of its workforce. Musk is shifting attention from his previous fascination with China. This strategic move is undeniably driven by business factors. Tesla's performance in China has faltered in recent months, with local electric vehicle (EV) manufacturers outpacing Tesla's sales. The company finds itself trailing in the Chinese EV market amidst a general slowdown in demand. This downturn in China poses significant challenges for Tesla's global operations.

Musk, when he visits India later this year, will be exploring investment opportunities in EVs, space exploration, and satellite-based services. Although India's EV market remains relatively small, it is expanding rapidly. EVs accounted for just 2 per cent of total car sales in 2023, but the government aims to increase this to 30 per cent by 2030, presenting a significant scaling opportunity for all players in the EV sector. Understanding the nuances of the Indian market, particularly consumers' demand for premium quality coupled with affordability, will be crucial for success.

Tesla's potential investment in India could lead to increased sourcing of components for its global manufacturing plants. Musk's relationship with India dates back to Tesla's early days when he began sourcing materials from the country. The spotlight on this relationship intensified when Prime Minister Narendra Modi visited a Tesla manufacturing facility in California in 2015.

In the run-up to the cancelled Musk-Modi meeting, speculation was that Musk may announce an investment in India for Tesla's production of a mid-priced car (priced around Rs 20-25 lakh), triggering competition among existing players to innovate and connect with new consumers. The speculated discussions between Tesla executives and Indian officials indicate the possibility of establishing a gigafactory in India to localise component sourcing and manufacture vehicles for both domestic and international markets. It was not clear whether Tesla would proceed independently or seek an Indian partner to navigate market intricacies.

Recently, Musk voiced a political opinion advocating for India's inclusion in the United Nations Security Council (UNSC). He argued that the current structure of the UN fails to adequately represent the world's most populous nations. Musk emphasised the need for a revision of UN bodies, highlighting the reluctance of those with excessive power to relinquish it. He criticised the absence of India, the most populous country on Earth, from a permanent seat on the UNSC as absurd. US government officials also joined in the comment subsequently. It is noteworthy that the US is demonstrating its geopolitical agenda by seeking to bolster trade and gain access to new markets for its enterprises. The timing of the US offering support for reforms to UN institutions, including the UNSC, is not coincidental but strategic.

India, with its burgeoning population, rapidly expanding middle class, and increasing appetite for technological progress, represents an untapped opportunity for Musk's ventures, among other US corporate giants who want a foothold in India. Musk's Starlink aims to bridge the digital divide in underserved regions, and India's extensive rural landscape provides an ideal environment for its deployment. Given the millions still lacking reliable Internet connectivity, Musk views India as a crucial market for Starlink's expansion, positioning it as a vital resource for those currently underserved by digital infrastructure.

It's also strategic for the US to secure its stake in the rapidly growing economy's advancements in space exploration. Following the success of the Indian Space Research Organisation (ISRO)’s Chandrayaan-2 mission, SpaceX announced collaboration with ISRO. SpaceX disclosed plans to aid ISRO in launching a 4.7-tonne communication satellite utilising its Falcon 9 rocket, further cementing Musk's involvement in India's space initiatives. Concurrently, Starlink is poised to operationalise its license to operate in India. These investments, seemingly sanctioned by Washington, underscore India's geopolitical significance and potential for strategic influence.

With a population of 1.4 billion and the potential to become the largest digital consumer market in terms of Internet access, India serves as a crucial base for Musk's other ventures, including X. Undoubtedly, Musk has much to offer India, and India is an important market for his ventures.

Srinath Sridharan is a policy researcher and corporate adviser. X: @ssmumbai.

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.