Tesla plans to build a factory in India, Trump says this is unfair to the United States

[PCauto] In a recent media interview, Donald Trump stated that should Tesla establish a manufacturing facility in India to circumvent the country’s high tariffs, it would be “unfair, very unfair” to the United States. His comment reflects concerns over India’s tariff policies and Tesla’s broader globalization strategy.

Just a week earlier, during Prime Minister Narendra Modi’s visit to the U.S., Trump lambasted India for enforcing tariffs as high as 100% on imported vehicles, asserting that such measures render it “nearly impossible to sell cars in India.” Nonetheless, both sides agreed to advance trade negotiations in an effort to resolve the tariff impasse. Notably, during a meeting on 14 February 2025, it is believed that Elon Musk and Modi discussed Tesla’s potential entry into the Indian market.

In March 2024, the Indian government unveiled a policy that reduces the import tariff to 15% for any automobile company that commits to investing at least $500 million in building a local manufacturing facility. Tesla has already earmarked sites in New Delhi and Mumbai for showrooms and has even released recruitment postings, although production has yet to commence. Trump contends that Tesla’s strategy will disadvantage American interests and could prompt his proposed “reciprocal tariff” policy—which would impose an equivalent rate on imported vehicles from countries that tax U.S. goods—thus intensifying global trade tensions.

What motivates Musk to pursue the Indian market despite Trump’s criticisms? India ranks as the world’s third-largest automotive market, yet its electric vehicle penetration rate remains modest at approximately 5.59% as of 2024. With the government targeting a 30% market share for electric vehicles by 2030, the opportunity for growth is substantial. By introducing a policy that lowers tariffs to attract foreign investment in local manufacturing, India offers Tesla a notable cost advantage: a potential reduction of import duties from 100% to 15%, thereby enabling a more cost-effective market entry.

Furthermore, Tesla’s competitors—such as BYD and MG—have already secured positions in India’s burgeoning new energy sector, and Tesla risks missing a pivotal growth opportunity if it remains on the sidelines. In addition, Musk envisions integrating SpaceX’s Starlink services in India, potentially generating synergistic benefits across multiple sectors.

Conversely, Trump has long championed the protection of domestic industries, arguing that punitive tariff policies enable other nations to benefit at the expense of the U.S. He maintains that India’s high tariffs severely impede American automakers from penetrating its market, and if Tesla shifts production to India to sidestep these tariffs, it could undermine the competitive edge of U.S. manufacturing.

Trump’s plan to impose equal tariffs on any country that taxes American goods—for example, instituting a 25% tariff on imported vehicles—means that if Tesla builds a factory in India, it might be seen as “evading American interests,” thereby risking damage to his policy credibility.

Moreover, Trump’s remarks might serve as a means to pressure India into lowering its tariffs. However, the allure of the Indian market for Tesla far outweighs the drawbacks of a short-term trade dispute, and the conflict between the two sides may endure over the long term. Additionally, his tariff policies could spark a multi-front trade war involving both allies and adversaries, heightening global economic uncertainty.

Tesla’s foray into India represents both a natural strategy for market expansion and a pragmatic response to existing trade barriers, while Trump’s “unfair” criticism underscores the clash between his protectionist logic and the demands of globalized commerce. This contest not only affects U.S.-India trade relations but also highlights the delicate balance multinational companies must achieve between localization and globalization. Ultimately, Tesla’s successful establishment in India will largely depend on the outcome of U.S.-India negotiations and Musk’s ability to navigate a complex array of risks.