Why will the Tesla vehicles destined for India come from Germany?

While waiting for a factory to open in India in the coming months, Tesla will import cars there. A complex decision.

Some decisions, at first glance, do not seem immediately logical. Thus, instead of importing right-hand drive models from China, which is closer, Tesla will initially flood the Indian market via its factory in Berlin, Germany.

A quick look at a globe indeed catches the eye. The ports of Mumbai (India) and Shanghai (China), where the Tesla Model 3 and Model Y are produced, are 5293 nautical miles apart, about 9800 kilometers. At a cruising speed of 10 knots, that’s roughly 22 days by sea, according to Ports.com.

Instead, Tesla and the Indian government opted for the second option, which is longer, more expensive, and more polluting. This involves importing a quota of cars — exclusively Model Y models as a consequence — from Germany until Tesla’s factory in India becomes operational.

According to the simulations by Ports.com, the shortest route, but currently the most dangerous due to pirates in the Red Sea, would be 7450 nautical miles or 13,800 kilometers. That’s a 41% increase, with a sailing time of 31 days.

However, by opting for a bypass around Africa to avoid unnecessary risks, the calculation jumps significantly: 13,150 nautical miles to travel, or 24,350 kilometers and 54 days at sea! More than double the distance compared to the route from China…

So why this choice?

The primary reason is purely geopolitical: India and China despise each other. These two economic powers, the most populous on the planet — 1.4 billion people each — are vying for control in this region of the world. The warming of relations between the United States and China is another factor tipping the scales, Musk wanting to reduce his risk exposure in the Middle Kingdom. The Chinese government seeks to weaken Tesla by subsidizing Chinese manufacturers at a loss, leading to a stark imbalance in tariffs.

Discussions between Tesla and India sped up after the promise of an investment of around 2 billion euros from the American automaker to establish a factory there. The Indian government agreed to reduce customs duties on temporarily importing cars from Europe so Tesla could start its commercial activities before scaling up. A significant victory for Tesla, even though Indian automakers, some already oriented towards electric vehicles like Tata or Mahindra, were strictly opposed to loosening trade protections.

Nevertheless, Tesla will not be able to import more than 8,000 cars per year under this tax scheme. Above that, costs will skyrocket again. The first deliveries are expected before the end of 2024.

In 2023, 4.1 million cars were sold in India, a record high, with 2% being electric models (82,000 units). The Indian government aims to increase this figure to 30% by 2030. A market of several hundred thousand vehicles is therefore opening up for Tesla.

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