A quick look around today’s coverage of Tesla (NASDAQ:TSLA) might make an investor worry. Tesla stock has been declining all day. At first glance, it might be temping to attribute these declines to the perceived delay of the company’s highly anticipated Cybertruck. The internet has been buzzing since news broke that the electric vehicle (EV) innovator had removed the truck’s 2022 date from its website. A macro look reveals the bigger picture, though. The S&P 500 has been declining all afternoon. EV stocks across the board are tumbling, including Tesla competitors Rivian (NASDAQ:RIVN) and Lucid Motors (NASDAQ:LCID). The trend of EV stocks declining we saw earlier this week is not stopping.
What’s Happening With Tesla Stock
As of this writing, Tesla stock is down almost 5% on the day. However, investors shouldn’t be worried. Today also brought the news that the company is working on launching in India. Following a tweet in which Musk stated that he is “working through a lot of challenges” with India’s government, the internet has been buzzing with speculation as to what an expansion into India could mean.
As it turns out, such a development for the company is likely to bring some significant new drivers for Tesla stock. Let’s take a more in-depth look into what investors can expect.
The Road Ahead
It’s not hard to see why Musk would set his sights on India. The country represents the world’s fifth-largest auto market, but that’s not even the most enticing detail. The size of India’s EV market is expected to grow to $152.21 billion by 2030, representing a compound annual growth rate (CAGR) of 94.4%. The demand is great, and it is only increasing. EV producers with significant production capacity will have a significant market to corner. Moreover, Tesla is taking consistent steps toward amping up its production. The company is well-positioned to secure a large portion of India’s growing EV market.
That doesn’t mean there won’t be obstacles. The most likely challenge to which Musk eluded is India’s high import duties. This is a constant constraint for auto producers. Business Insider reports that the country’s taxes are “60% on EVs that cost $40,000 or less and 100% on those above $40,000.”
The Business Times reports, though, that India’s government has refuted Musk’s claims. The articles also state that India’s government has implemented a policy-linked insurance scheme specifically for the EV sector. Such a policy, they contest, would benefit companies such as Tesla.
We shouldn’t forget that other governments have been willing to play ball when Musk wants to make a deal. Chinese President Xi Jinping isn’t known for being friendly toward U.S. companies, but he was willing to rewrite some of his country’s rules in order to entice Musk to set up shop there. India’s government will have incentive to do the same as its country’s demand for EVs continues to grow.
The Bottom Line on Tesla Stock
The way it looks from here, India’s government will reach a deal with Musk some time within the coming year. Indeed, Tesla’s dealings in China have proved quite beneficial. Therefore, India is the next logical market for it to corner. When the agreement is reached, it will send Tesla stock shooting up.
This important deal may still be a ways out. Until then, though, investors should cast an eye toward India. This will be a year-defining partnership whenever it happens.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.