Tesla (NASDAQ:TSLA) may be on the verge of another international expansion. Indian Prime Minister Narendra Modi is currently visiting the U.S., and reports indicate that his schedule includes a meeting with Elon Musk. While they won’t be the only people present, this meeting is a clear indication that India wants Tesla to start building cars on its soil. The nation’s government has been reportedly negotiating with the electric vehicle (EV) leader for some time, but they have never reached an agreement. However, it is easy to see that if Tesla set up shop in India, it would benefit both parties. TSLA stock is rising today in anticipation of a positive update on the potential partnership.
Does this mean Tesla will be venturing into India’s growing EV market in the coming months? Let’s take a closer look at today’s news and assess what investors should be expecting.
A Passage to India for Tesla?
This week is off to a generally good start for TSLA stock, though its performance has been somewhat volatile today. As of this writing, it is up over 1% for the day and is trending upward after losing some early morning momentum. While the stock has performed well recently, it hasn’t been a great year for Tesla. The company’s production and delivery statistics are both significantly below expectations so far. This hasn’t been good for Musk’s reputation, although the CEO seems to be refocusing on Tesla after hiring a new CEO for Twitter.
Clearly, Musk understands, though, that building a new gigafactory in an international market will help drive growth for TSLA stock. Earlier this month, he met with Emmanuel Macron. The French Prime Minister told reporters that he planned on walking into the meeting with an agenda that included not just EV and battery production but also artificial intelligence (AI) and regulation. He later issued a tweet urging Musk to build the new Tesla factory in France. However, Italy has also made it clear that it wants to be in business with the EV leader.
As noted, Musk has been eyeing India as a potential location for a Tesla gigafactory for some time. However, the country hasn’t been willing to meet Musk’s conditions. Before committing to building an entire factory, Musk wanted India’s government to lower import taxes enough for his company to import and sell Tesla EVs there to test the market. While India has stood firm in its refusal to consider this, Modi’s meeting with Musk suggests that the tide may be shifting in part due to geopolitical conditions. As Bloomberg reports:
“Collaboration on critical and emerging technologies between US and Indian companies, and reducing regulatory barriers standing in the way of trade in strategic areas is a key focus of Modi and President Joe Biden’s meeting scheduled for Thursday, US National Security Adviser Jake Sullivan said at an industry event in New Delhi last week.”
TSLA Stock: The Road Ahead
If India’s government is finally willing to meet Musk’s demands, it would mark a significant step forward for the automaker. This would also benefit TSLA stock significantly. India’s EV market is booming and is expected to exceed $113 billion by 2029, expanding at a compound annual growth rate (CAGR) of more than 66%. That type of growth potential has to be enticing for Musk, regardless of whether or not Modi is willing to meet his demands regarding import taxes.
On the date of publication, Samuel O’Brient did not have (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.
