Tesla Plans Cost-Cutting, Expands to India

CEO Elon Musk has been planning to make a $25,000 electric car.
Anthony RussoFeb 16,2021,17:51

Tesla (Nasdaq: TSLA) is now expanding to India to set up a new factory, which could help the company cut production costs.

Since early 2021, news surfaced that Tesla is planning to enter the Indian market after chief executive officer Elon Musk all but confirmed it with a Tweet.

Over the weekend, chief minister Shri B.S. Yediyurappa confirmed that the world’s most valuable car company has selected the southern Indian state of Karnataka to establish its EV manufacturing plant. Bloomberg’s Katrina Nicholas reported on Monday that Tesla was closing in on a deal to make electric cars in India for the first time.

“India represents another key strategic market for Tesla and could represent 5% [plus] of global sales by 2026 for Tesla,” Wedbush analyst Dan Ives wrote in a recent research report, as cited by Barron’s today.

Tesla Cut Costs in China

Tesla’s biggest challenge has been cutting costs and making its vehicles more price friendly. Tesla was able to achieve that in China last year, as it ramped up local production.

Just last month, Tesla started to deliver its China-made Model Y crossover vehicles. The Model Y’s base price starts at 339,000 yuan (roughly $52,500), cheaper than the EC6 crossover vehicles of Nio (NYSE: NIO), which start at 368,000 Yuan.

Musk Sets $25,000 Goal

But still, Musk wants to drive down costs of EVs even further.

“We’re confident that, long term, we can design and manufacture a compelling $25,000 electric vehicle,” the world’s wealthiest individual said on the company’s battery day in September.

He added, “So this has always been our dream from the beginning of the company …it’s always our goal to try to make an affordable electric car.”

India may present just the opportunity Tesla has been looking for.

“Considering the price of a Tesla, Elon Musk probably won’t be able to sell an EV to most of the population in emerging economies,” Pedro Pacheco a Munich-based senior research director at Gartner Inc said, as cited by Bloomberg.

Further, “However, looking at the size of the population and the potential for economic growth, Tesla will probably target a fast-growing group of affluent individuals that, in absolute terms, compares quite favorably to what we see in many developed countries.”

Intraday Tuesday, Tesla was trading at $796.84 per share, 2% lower from Friday’s close. Shares of Tesla are up 11% year-to-date.

Topics:Elon Musk, Tesla, Nio.