Tesla (NASDAQ:TSLA) finally has some good news this morning. Ever since CEO Elon Musk reached a deal to acquire Twitter (NYSE:TWTR), TSLA stock has been plunging. While shares are finally back in the green today, they have considerable ground to recover. And, with Musk’s all-too-important deal on the line, it’s crucial for the CEO that TSLA not fall farther. Thankfully, though, Tesla is on the verge of securing a deal in India that could accelerate its share growth.
After spending the past two days in the red, TSLA stock is rising again. As of this writing, it’s up more than 2%. The stock is on a clear upward trajectory and shows no signs of slowing down. However, that doesn’t mean it will be a smooth ride back to where shares traded last week. The stock is still down more than 8% for the past five days, trading at around $900 after starting the week at more than $1,000 per share.
This movement seems to have been driven by the markets adjusting to news of Elon Musk’s Twitter acquisition. However, there’s a new potential catalyst that’s worth giving a closer look.
What’s Happening with TSLA Stock?
Elon Musk has long wanted to set up shop in India. Now, the country may be willing to work with him. According to Reuters, India’s transportation minister Nitin Gadkari says Tesla is welcome to produce and sell electric vehicles (EVs) in the country. But there’s a catch: the deal will only hold if Tesla imports nothing from China. According to Gadkari, this move makes sense for Tesla, too:
“If Elon Musk is ready to manufacture in India, there is no problem. We have got all competence –- the vendors are available, we have got all technology, and because of that, you can reduce the cost.”
The fact that India is now willing to negotiate with Musk makes sense. EV demand in the country is robust and the market is only expected to keep growing. If Tesla were to establish a factory in India, it would also align with Prime Minister Narendra Modi’s “Make in India” initiative, which focuses on spurring economic growth via domestic manufacturing. That may also explain why the country is insisting Tesla does not import its vehicles from China, a chief manufacturing competitor.
Officials haven’t spoken yet on what a Tesla deal would mean for its import taxes, one of Musk’s main concerns about the potential agreement. What we do know, however, is that India’s offer comes at a time when the company could certainly use a new catalyst. If TSLA stock doesn’t regain the ground it has lost so far, Elon Musk’s Twitter takeover will be even harder to finance. The company needs to give investors more hope. A deal to produce EVs in India would do exactly that.
What it Means
All things considered, taking up India on its offer makes a lot of sense for Elon Musk. Producing EVs without Chinese imports may be more pricey, but the benefits appear to far outweigh the initial costs. Setting up a manufacturing facility in India would also allow Tesla to secure a share of one of the larger EV markets in the world, ahead of U.S. competitors.
There’s no question this would be a boon for TSLA stock. Shares may be rising slowly today, but an agreement to produce and sell EVs in India would really send TSLA soaring back to where it needs to be.
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.
