Why Did Elon Musk Go To China Instead Of India? These Are The Reasons
Back in April of this year, it was announced by the billionaire CEO of Tesla, Elon Musk, that he was very excited to visit India in a few days. However, just 10 days later, this trip was canceled by Musk. This then created a frenzy amongst the Indian government and media. What added fuel to the fire was that Musk, after canceling the trip to India, went ahead to meet Chinese Premier Li Qiang. Now it has been reported that this move was not intentional and there were several reasons behind it.
Tesla’s Explanation
According to reports, the highly anticipated visit was not only important because it involved scouting a location for a new $3 billion Tesla gigafactory, but also because Musk planned to bring along his family for a holiday. However, just ten days later, Musk abruptly canceled the trip, citing “very heavy Tesla obligations.” It was reported that they had prepared around 20 visas for Musk’s delegation.
According to reports, Musk’s cancellation of his India trip was primarily driven by heavy obligations at Tesla. It has been stated that the billionaire CEO was advised by his Tesla employees to prioritize an unmissable opportunity in China. They suggested this despite knowing the potential diplomatic fallout with India.
It was cited that the internal pressure came from the need to secure a significant breakthrough in China, the world’s largest car market. Reports have highlighted that this decision was not made lightly.
This was because it risked snubbing Indian Prime Minister Narendra Modi during a crucial election period. However, the potential rewards in China were deemed too significant to ignore.
China’s Importance for Tesla
For those who may not be aware, China represents a critical market for Tesla. This is because the country accounts for 60% of global electric vehicle (EV) sales. During his visit to Beijing, Musk met with Chinese Premier Li Qiang and sealed a deal to advance Tesla’s full self-driving technology in China.
This agreement included a lane-level mapping and navigation contract with Baidu, which allowed Tesla to start trailing its full self-driving technology in Shanghai.
Additionally, Tesla has also managed to become the first foreign-owned carmaker to be included on a Chinese local government’s list of electric vehicles approved for purchase by public, party, and government groups.
India’s EV Market Potential and Challenges
Despite the allure of China, Musk has not lost sight of India’s long-term potential. India, which at the moment is the world’s third-largest car market, offers significant opportunities for Tesla. Over the years, Musk has expressed his obsession with India’s market potential and its prospects as a hub for car exports.
Back in 2022, Musk became increasingly confident about building EVs in India. Following this, during a 2023 meeting with Modi in New York, he stated that Tesla would try to enter the Indian market “as soon as humanly possible.” However, expanding into India is fraught with challenges.
Tesla has been considering registering for the Indian government scheme that offers lower tariffs on higher-priced imported EVs. This was to be done in exchange for a commitment to manufacture them locally within three years. However, this scheme required Tesla to pledge substantial investment in India.
So after Musk’s canceled visit, local officials have not held further discussions with Tesla about the tariff scheme, and the complex nature of the scheme has not garnered significant interest from other foreign carmakers either.
Internal Struggles and Strategic Shifts
Apart from these, it has been reported that Tesla is also undergoing significant internal changes. The company has been reportedly cutting jobs and is making a pivot towards autonomous driving and artificial intelligence.
Just before canceling his India trip, Musk announced in an internal memo that over 10% of Tesla’s staff would be laid off. This included the division managing its industry-leading “Supercharger” network and the entire public policy unit.
These internal changes added to the reluctance to announce a major investment in India at a time of significant cost-cutting. Rohan Patel, Tesla’s global head of policy and business development, who was leading the negotiations with Indian officials, was also among those let go.
Musk’s decision to prioritize China over India did not come without diplomatic consequences. Modi, who was in the midst of a tight election campaign, was left waiting. This led to speculation about Musk’s commitment to India.
Some Indian officials speculated that the delays in regulatory approval for Musk’s Starlink satellite business in India might have influenced his decision. However, sources close to the matter indicated that Starlink issues did not impact the decision to cancel the India trip.
What’s next?
As per the reports, despite this diplomatic snub, Modi remains open to future visits from Musk, with the two exchanging messages on X after Modi’s election victory last month. Several Indian officials are confident that Tesla has not lost interest in the market, with one official stating, “The general drift is they will be coming sooner or later.”