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Tesla’s ‘challenges’ with India gov’t halt potential rescue of $27B manufacturing initiative

(Photo: Tesla)

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In 2014 when Narendra Modi officially became Prime Minister of India, his first message to people around the world was that, under his leadership, Indian manufacturing operations would become one of the world’s most robust. In September of the same year, Modi officially launched “Make In India,” a government initiative that encouraged companies from all corners of the globe to develop, produce, and assemble products in India with sizeable investments into manufacturing.

Five years after the initiative began, India’s manufacturing GDP was the lowest it had been in twenty years. It dropped 1.2% in the first five years following the launch of Make In India, although the growth rate of manufacturing globally increased 6.9% from 2014-15 to 2019-20.

Seven-and-a-half years later, Make In India is still a work in progress.

It was a disappointing start to the still active program, which has not been a complete failure. General Motors brought a $1 billion investment to a manufacturing facility in Maharashtra, the city where Tesla has been rumored to land with a potential factory of its own. Kia invested $1.1 billion in 2017 and has been producing vehicles at its factory in the Anantapur District since January 2019. Electrification, where the global automotive industry is heading, is still a weak point in India. Less than 1% of the country’s cars are electric.

Because of the extensive and massive $27 billion budget that has been set aside for these programs, India has tried to persuade companies to bring manufacturing to the country directly. With a sky-bound budget and thirst for local manufacturing, the confusion begins to set in: Why is Tesla, a company with a reputation for building the world’s best electric vehicles, that could likely build a manufacturing facility anywhere in the world, having so much trouble landing a deal in India to manufacture its vehicles?

A Tesla Model 3 testing in India (Credit: pune_exotics | Instagram)

The disconnect seems to be between Tesla’s requests and India’s needs. When Elon Musk, Tesla’s CEO, tweeted last night that there were still “challenges” when working with the Indian government, which had put the plans on hold once again, it seemed that the automaker’s requests for import duty reductions went to the wayside. An issue that seems to be Tesla’s most integral wish, import duty reduction has received support from some Indian politicians, noting that demand testing, which has been one key factor in the company’s attempts to enter India, cannot happen if duties are too high. “If they have to manufacture here, they need the numbers, and no one can test the market when you impose such high import duty on the vehicles,” Union Road Transport Minister Nitin Gadkari said in August.

If import taxation was not an issue, Tesla could use data already available to them to determine whether a Gigafactory would make sense in India. Spoiler alert: Tesla would never build a factory in India based on sales figures from the past ten years as very few people can afford them when import duties are involved. Any vehicle below $40,000 is subjected to 40% tax. Any vehicle more expensive than $40,000 receives a 100% tax, effectively doubling the price of the vehicle. Currently, Tesla has no vehicles in its lineup that are under the $40,000 price threshold.

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The problem is those import duties are a huge issue. India seems to be against doing it, at least for now, even though the massive $27 billion budget would not be directly affected by an import tax rollback. In fact, that budget could still factor in tax losses from duty reductions. Perhaps the reasons linked to Tesla’s delayed entrance into India could be linked to the automaker’s lack of need for other companies due to its vertical integration. While this sounds far-fetched, the President of the Automotive Component Manufacturers Association (ACMA) said that localization is always a priority, and companies entering the market need to promote local manufacturing across the board, not just with the final product.

This would include everything from complex factors like semiconductors to other elements that are as simple as car seats. Tesla makes many of its parts in-house, including some microcontrollers and its automotive seats. “Tesla is absurdly vertically integrated compared to other auto companies or basically almost any company. We have a massive amount of internal manufacturing technology that we built ourselves,” Musk said in late 2020. “This makes it quite difficult to copy Tesla, which we’re not actually all that opposed to people copying us because you can’t do catalog engineering. You can’t just [say] I’ll pick up the supplier catalog, I’ll get one of those.”

This leaves India at a crossroads because, while Tesla would be a great benefit to the economy, manufacturing efforts, and employment, the company would not have as much to offer other sectors and companies as an automaker that is less vertically integrated. Reports have indicated that Tesla was planning to source components from local suppliers, but details regarding these rumors were slim.

India Prime Minister Narendra Modi visits the Tesla Fremont Factory in 2015.

But Tesla is far from a liability for any region. After launching Gigafactory Shanghai in China in early 2020, the factory has become Tesla’s biggest producer of EVs and accounted for nearly 52% of the automaker’s total deliveries for 2021. Despite the company’s vertical integration, which has increased gross margin on some Made-in-China Tesla vehicles to nearly 40%, the company has provided China with many economic benefits. The site will soon employ 9,000 people on the Model Y line alone after a confirmed expansion found in Tesla’s Environmental Impact Assessment for 2021. Gigafactory Shanghai will have 18,000 employees by the time the line expansion is completed. Additionally, it has helped encourage the adoption of EVs in Europe through exports, making the Model 3 the best-selling EV on the continent in 2021, with over 109,670 units sold. The next closest was the Renault Zoe, with 58,242 sales.

Whether Tesla will ever enter India seems to be a question that has no definitive answer currently. However, Tesla has been teasing a potential entrance for seven years, ever since Modi visited the Fremont factory in 2015. The long saga of Tesla and India will continue for now. With Tesla’s attractive status as an EV powerhouse, other countries might come knocking on the door, stealing an opportunity to increase India’s slumping reputation as a manufacturing hub. Considering the Made In India initiative’s backtrack in manufacturing GDP, perhaps new strategies should be tested.

I’d love to hear from you! If you have any comments, concerns, or questions, please email me at joey@teslarati.com. You can also reach me on Twitter @KlenderJoey, or if you have news tips, you can email us at tips@teslarati.com.

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Joey has been a journalist covering electric mobility at TESLARATI since August 2019. In his spare time, Joey is playing golf, watching MMA, or cheering on any of his favorite sports teams, including the Baltimore Ravens and Orioles, Miami Heat, Washington Capitals, and Penn State Nittany Lions. You can get in touch with joey at joey@teslarati.com. He is also on X @KlenderJoey. If you're looking for great Tesla accessories, check out shop.teslarati.com

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Investor's Corner

SpaceX’s biggest earnings test yet lands Tuesday, and Tesla shareholders should be watching

SpaceX reports earnings Tuesday as Wall Street watches AI spending, Starlink growth and Tesla merger

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SpaceX reports third quarter results after the market closes Tuesday, with a webcast at 4:30 p.m. ET streamed on X, and Tesla follows a day later. Bloomberg consensus, cited by Pepperstone, calls for revenue of $12.89 billion, adjusted EBITDA of $6.62 billion and adjusted EPS near $0.15. That would be about 65% growth from the second quarter and SpaceX’s first profitable quarter since its IPO. Analysts expect roughly $6.4 billion from AI and $4.9 billion from Starlink, which is projected to reach 14.3 million consumer subscribers. Capital spending is forecast at $19.6 billion, leaving free cash flow near negative $11.6 billion.

The numbers matter because SpaceX has spent months trying to win over a skeptical market. It priced its record IPO at $135, spiked to $225.64, then sank near $105 in early August. Friday’s close of $146.03 sits about 28% below the June high. The Q2 report beat on revenue at $7.8 billion and put Starlink at 12 million subscribers, but $18.4 billion of capex hurt the stock. Since then SpaceX reached orbit on Starship Flight 14 with 26 Starlink V3 satellites, agreed to buy 800 MHz spectrum for about $8 billion as part of its Starlink Mobile push, and signed a fourth compute hosting deal in four months worth roughly $13 billion a year from December. Management is targeting more than 2 gigawatts of compute by year end and a $100 billion annualized revenue run rate. Evercore ISI, which raised its target to $275, said the quarter may be judged more on those targets than the reported figures

All of this sits under the Tesla merger question. Barclays analyst Dan Levy expects an all stock deal in which SpaceX buys Tesla at a premium, using reference values of $2.1 trillion and $1.5 trillion, and said an announcement would need to come by late October or early November to be voted on at Tesla’s December 6 annual meeting. Barclays estimates Musk would hold about 37% of the combined company and 56% of the votes. Musk said in July that combining companies cannot be discussed on an earnings call, but an investor question asking when SpaceX will merge with Tesla is sitting on SpaceX’s Q&A platform, and Teslarati has tracked how the Roadster demo revived the talk.

If a deal happens, Tuesday’s result would effectively set the price Tesla holders would receive. Their shares would convert into SpaceX stock, along with exposure to a company with a heavy investment on AI, while Tesla itself expects 2026 capex above $25 billion. A strong quarter and calmer spending would make that exchange easier to sell. Another round of heavy capex and a falling stock would make it harder.

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SpaceX’s Gwynne Shotwell just made a quiet gesture toward Tesla

SpaceX president Gwynne Shotwell quietly followed Tesla on X, and merger watchers noticed right away.

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SpaceX President and COO Gwynne Shotwell has started following Tesla’s official account on X, a small change that landed in the middle of a very loud merger conversation. Whole Mars Catalog joked about it on Sunday.

A follow is not an announcement, and neither company has said anything about a deal. What gives the moment weight is the timing. Barclays analyst Dan Levy has told clients that an agreement could come before Tesla’s annual meeting, which must be held by December 6, with SpaceX as the buyer in an all stock deal, as we reported after the Roadster unveiling. Wedbush’s Dan Ives has stuck with a 2027 timeline.

Shotwell is the executive most worth watching if the two companies do move closer. When Musk was asked at the All In Summit why Tesla and SpaceX remain separate, Shotwell sat next to him and said SpaceX personnel had already moved into xAI to fill leadership and engineering gaps. The businesses were integrating “faster than I thought,” she said, though “not fully integrated yet.” Her responsibilities have also grown since SpaceX absorbed xAI, and she now oversees operations that include Grok and the company’s AI compute buildout.

The financial links are already there. Tesla’s $2 billion xAI investment turned into a stake of less than one percent in SpaceX, the two share the Terafab chip project in Austin, and Musk exercised his 2018 Tesla options a week after SpaceX began trading, a sequence analysts flagged as giving SpaceX public shares to use in a deal. Musk holds about 20 percent of Tesla and controls 85.1 percent of SpaceX’s voting power, according to our earlier breakdown.

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The next test is close at hand. SpaceX reports its second earnings as a public company on Tuesday after the close, and Tesla follows on Wednesday. Musk told analysts in July that “we can’t talk about combining companies and that kind of thing on an earnings call,” so a direct answer is unlikely from either stage. Tesla shareholders can still submit and vote on questions through the Say portal until 4 p.m. EDT on Monday, and the merger is a recurring theme in the queue.

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Tesla Roadster owners to get “Flying Stunt Mode” and looping track access

Musk says Roadster owners can command the unveiling stunts autonomously, with a Texas looping track.

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Elon Musk says owners of the new Tesla Roadster will be able to ask the car to perform the stunts Tesla showed at its unveiling, with the car doing the driving itself. Musk made the comment Saturday in a reply on X to tech blogger Robert Scoble, and he added a promise of a looping track at Tesla’s Texas headquarters.

Scoble had argued that the person in the Roadster is not really driving it. In his description, the driver operates a computer that tells another computer what to do, with steering, braking and acceleration all handled by wire. Musk answered, “True. You will be able to ask the Roadster to perform any of the tricks shown autonomously, as it will be sentient. Also, we will have a wild looping track (crazier even than Hot Wheels) at our Texas HQ where you can test out your Roadster.”

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At the October 15 event outside Waco, the car drove up a curved ramp until it was upside down, flew off on cold gas thrusters, flipped and landed. It also hovered over a Cybercab, Cybertruck, Semi, Model Y and Model 3 while moving. As we noted in our breakdown of the three Roadster configurations, Musk said at the event that the car “literally is just going to puff itself up” to perform the maneuvers whenever an owner wants. Saturday’s reply adds that the car would run them on its own.

Tesla has described some of the hardware that would make that possible. The Roadster uses steer by wire with a yoke, and its cold gas thrusters rely on electric actuators for small adjustments in flight. A fan system under the car creates suction, which Tesla says is strong enough to hold it upside down, a setup we covered in our look at the Roadster’s fan system and thrusters.

Musk did not say when an autonomous stunt feature might arrive, how it would work, or what he means by sentient. He also gave no size, location or opening date for the Texas track. Production is planned for Giga Texas in 2027 or 2028, and Tesla says the car is not approved for public road use. The Rocket version, the one built to fly, is invite only.

The comment follows a week of Musk teasing the event, including his claim that the demo would be a banger, which we covered before the stream. Tesla reports third quarter earnings on October 21, and shareholders can submit and vote on questions through the Say portal until 4 p.m. EDT on October 20, according to our earnings Q&A preview. A question about autonomous Roadster stunts and the Texas track would be a quick way to get specifics from management.

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