Tesla Arrives, But Who Wins?

Good Morning. Tesla is finally rolling into India, but not quite in the way that India had hoped. Instead of making cars here, Tesla will sell fully imported models from China and the US. Meanwhile, VinFast and Indian automakers are pushing ahead with major local manufacturing plans.

In other news, India’s oil imports from Russia hit an 11-month high, experts urge caution on Air India crash conclusions, and the country trims its trade deficit.

THE TAKE 

As Tesla Imports Cars, VinFast And Locals Charge Ahead

Car maker Tesla, which has been in the news for a lot of things—mostly unrelated to cars—has announced it is launching tomorrow in India with its Tesla Experience Centre in Mumbai.

However, the launch and sales will not involve cars manufactured in India, as originally desired by the Indian government. Instead, these will be cars made in China and the United States, imported here lock, stock, and barrel.

While the first consignment would have faced peak customs duties of 70% (for cars valued below $40,000), subsequent consignments might see reduced import duties. This, of course, depends on the final contours of the India-US bilateral trade agreement.

EV Rivals Arrive, Tesla Hesitates

Tesla was extensively wooed by India over the past year, but times have changed for Tesla and the electric vehicle (EV) industry.

The Chinese have now arrived, shaking up the global EV market in a way few legacy product markets have been disrupted—and that too by relative outsiders, ranging from battery giants like BYD to mobile phone software and hardware players like Xiaomi. When it’s not China, it’s Vietnam.

Vietnamese EV major VinFast will start production at its $2 billion facility in Thoothukudi, Tamil Nadu, by the end of this month, according to a report in Business Standard. Moreover, the company hopes to begin vehicle deliveries from the festive season starting in August.

VinFast Auto India is setting up a 150,000 units per annum manufacturing facility, along with a 27-city dealership network, battery value chain partnerships, and aftermarket and service tie-ups. It also plans to export cars from Tamil Nadu.

While this approach is no guarantee of success, an embedded “Made in India” strategy has generally worked for car makers—whether it’s the Korean giants like Hyundai and Kia, Japanese brands like Toyota and Honda, or European car makers like Mercedes, BMW, Skoda, and Audi.

Finally, even as Tesla has hesitated over the past year, Indian players like Mahindra and Tata have stepped up their EV game—and consumers have responded enthusiastically.

India is a tough market to crack.

India Remains A Tough Auto Market

American brands like Ford and General Motors set up shop here and tried hard, but they did not succeed like the Koreans or the Japanese. There may be lessons in that, and perhaps Tesla was trying to avoid those very challenges to begin with.

Tesla now has excess manufacturing capacity elsewhere in the world and would obviously prefer to ship finished products into countries like India, as it does with others that allow more liberal imports.

While manufacturing jobs that could have come with Tesla will now come instead with entrants like VinFast, for some car companies, India may be a better source for components or software rather than a place to build cars.

Tesla already imports components from India and reportedly started a research and development (R&D) centre here four years ago. Other car makers have a larger footprint, but Tesla may yet end up creating the jobs that were once expected of it—only, they might be in software rather than hardware.

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CORE NUMBER

Rs 5.63 lakh crore

That’s India’s net direct tax collection from April 1 to July 10 in this financial year — down 1.34% year-on-year, according to The Economic Times citing Income Tax Department data.

💡 What’s behind the dip:
Tax refunds surged 38% to Rs 1.01 lakh crore, pulling down net collections despite higher gross receipts.

📊 The breakdown:
Gross direct tax collections during the same period rose 3.17% to Rs 6.64 lakh crore, including Rs 2.89 lakh crore from corporate tax and Rs 3.56 lakh crore from non-corporate tax.

🔎 The context:
The decline highlights liquidity push via refunds even as India manages steady overall tax growth.

FROM THE PERIPHERY

Oil Imports From Russia At 11-Month High. In June, India imported more Russian oil than it has in the past year, because of the Iran-Israel conflict. Specifically, data from global commodity tracking firm Kpler showed that India imported a record 2.08 million barrels of crude oil from Russia. 

The Backstory: That’s despite the fact that India has been trying to diversify its oil sources and buy more oil from the US. US President Trump is also considering a bill called the ‘Sanctioning Russia Act of 2025’ – this Act will place a 500% tariff on countries using imported Russian oil. 

Projections: These proposed secondary sanctions by the US would massively increase India’s oil import bill, potentially by $3–6 per replacement barrel. Indian refiners may also face higher freight and insurance costs.

Air India Crash: Experts Urge Against Drawing Conclusions. Since the Aircraft Accident Investigation Bureau (AAIB) released its preliminary investigation report about the Air India crash over the weekend, many people are coming up with theories of pilot suicide or human oversight. But experts like former AAIB chief Aurobindo Handa and the Indian Commercial Pilots’ Association warn against conjecturing, and recommend waiting until the final report comes out.

Setup: The 15-page report says that in the cockpit voice recording, one unidentified pilot asked the other why he had cut off the fuel, which the other denied.

What This Means Going Forward: The report notes there was no automatic engine failure. Air accidents remain extremely rare, with odds estimated at just 1 in 100 million flights. The Core also reported on the same over the weekend.

India Cuts Its Trade Deficit. In June, India’s merchandise trade deficit dropped to $20.7 billion, from $21.9 billion in May. An Economic Times report quotes a Union Bank of India (UBI) report which said that the drop came thanks to a sharp drop in oil and gold imports, which reduced India’s total import bill. India has also been seeking cheaper oil from Russia and the US, which helped as well. 

Fast Facts: Moreover, the UBI report cited governmental policies too – India imposed anti-dumping duties on four Chinese chemicals, banned jute and woven fabric from Bangladesh and restricted iron ore pellets from Oman. 

Future: While this signals a cautious optimism that India is effectively managing its trade balance, despite global price fluctuations, the report cautioned that a rise in commodity prices could increase India’s import bill in the near future. 

Govt PLI Helped Boost Exports. Electronics and pharmaceutical companies claimed nearly 70% of the Rs 10,114 crore disbursed under India’s Production Linked Incentive (PLI) scheme in FY25, according to government data that Businessline quoted.

By the Numbers: Electronics firms received Rs 5,732 crore, while pharmaceutical players got Rs 2,328 crore. The government launched the PLI scheme in 2021 with a Rs 1.97 trillion budget to boost manufacturing across 14 sectors. It also disbursed funds to telecom, food processing, automobiles, medical devices, and drones. 

Outcome: Strong support helped electronics exports grow 32.5% to $38.6 billion in FY 2024-25. Computer hardware exports doubled, and pharma exports rose 10% to $30.5 billion in the same time period, reaching over 200 countries.

Correction: In our July 11th newsletter, we incorrectly stated that premium motorcycle volumes surged 65% from 1.9 million to 2.3 million units. This was inaccurate. The actual growth in premium motorcycle sales was 21% above pre-Covid levels, not 65%. We regret the error and thank our reader for bringing it to our attention.

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH, Kudrat Wadhwa | ✂️ Rohini Chatterji | 🎧 Joshua Thomas