Elon Musk is not India’s ideal foreign investor

India may get more than it bargained for when it comes to Elon Musk. The Tesla boss' role in the White House might make it easier for him to set the terms of his entry into the world's third-largest car market. But President Donald Trump's aim of cutting the US trade deficit will leave India less leverage to wrangle coveted factory jobs it wants from Musk.

The electric vehicle maker has identified locations for two stores in India, Reuters reported citing unnamed sources, and is hiring for customer-facing and back-end roles in the country. That has fuelled speculation that Musk's meeting with Indian Prime Minister Narendra Modi last week may pave the road for Tesla to finally sell cars in the country.

The biggest deterrence is India's high tariffs on imported vehicles, which New Delhi once hoped would persuade foreign brands to manufacture locally. But the Tesla boss has resisted, probably because local demand for luxury EVs has yet to catch up to China, the company's second most important country by revenue after the United States.

It's possible that Modi may now consider lowering or dropping the auto tariffs - to please Trump - or carving out exemptions for Tesla. But that would only weaken New Delhi's hand in negotiating with Musk.

Trump has already remarked that a Tesla factory in India aimed at circumventing local duties would be "unfair" to the US Moreover, it's not clear Tesla needs another factory either. The EV maker utilised just three-quarters of its existing production capacity across the US, Germany and China in 2024 - down slightly from the year before. That suggests the company expects global demand to slow further.

The risk to Modi is for him to grant concessions to Musk, only to end up with little more than Tesla showrooms. True, the government has another bargaining chip: Musk's Starlink is awaiting security clearance for a licence to offer satellite broadband services in India. But against the backdrop of Trump's tariff threats, New Delhi should be careful of what it wishes for from the world's richest man.

US President Donald Trump told Fox News in an interview aired on February 19 that if Tesla were to build a factory in India to circumvent that country's tariffs, it would be "unfair" to the United States.

Tesla has selected locations for two showrooms in New Delhi and Mumbai, moving closer to its long-delayed plans to sell its electric cars in India, Reuters reported on February 18, citing unnamed sources familiar with the matter.

The electric vehicle maker has posted job ads on professional networking platform LinkedIn for 15 positions across three locations in India since February 18.