Elon Musk has wanted to expand Tesla’s (NASDAQ:TSLA) reach into India for years. After facing challenges — and government pushback — TSLA stock may finally be getting the greenlight in India.
So what do you need to know? According to a new report, the administration of Prime Minister Narendra Modi may be willing to negotiate with Musk.
Tesla has asked the Indian government for a reduction on the country’s import tax. Now, rumor has it that the government is willing to consider this request, if Tesla spends at least $500 million on locally sourced components. Over time, the country would also require Tesla to increase its domestic sourcing 10%-15% each year.
Musk has wanted to expand into India’s market for several years, and for good reason. India is the world’s fifth-largest auto market, and it is expected to reach $152.21 billion before the end of the decade. Gaining a footing in such a fast-growing market would be excellent for TSLA stock, particularly if the company arrives before its competitors.
While Musk’s hesitation has been due to India’s high import duties, it seems that the country’s leaders may be trying be trying to meet him halfway.
The Road Ahead for TSLA Stock
The way it looks from here, there’s no reason that Tesla can’t reach an agreement with India’s government.
The electric vehicle producer has been attempting to negotiate import taxes down for months, and the compromise would not require Tesla to do anything new. According to Bloomberg, Tesla claims to have previously purchased $100 million worth of EV components from Indian suppliers.
Complying with India’s requests seems like a small price to pay for Tesla to see its wish come true. With import taxes slashed, the automaker could set up shop in a booming international market with growing demand. It doesn’t take much economic analysis to see how much this would benefit TSLA stock.
The Bottom Line on Tesla
It was inevitable that Musk would try to gain a footing in India’s electric vehicle market before his competitors. If the reported rumors are true, it means that the country’s leaders have recognized the benefit of working with him.
Any further reports of progress will send TSLA stock back into the green. Investors should be watching closely.
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.
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