Musk in Beijing as Apple seeks to reshore from China to India

Apple CEO Tim Cook, who visited India last year, has described it is an “incredibly exciting market” and a “major focus” for the company, as the Cupertino-based iPhone maker highlighted that business in India “set a quarterly record, grew very strong, double-digits year-over-year”.
India is at a “tipping point”, he said during the Q2 earnings call of the company, where Cook mentioned India 20 times.

CounterPoint Research estimates that in the next two years, India will emerge as the third-largest market for iPhones in the world. The US is the biggest market, and that’s unlikely to change. Currently, India ranks fifth behind the US, China, Japan and the UK. CounterPoint Research estimates that in 2024, India will surpass the UK, and by 2026, it will also edge out Japan.

For both Musk and Cook, India represents a market too large to ignore. For both, however, the goals could be different, which could partly explain why Musk has not really hurried to India.

According to a report by Bloomberg, in fiscal 2024, Apple has assembled iPhones worth $14 billion in India, with about one in seven iPhones assembled in the world now being done in India.

According to an Economic Times report, Apple plans to boost its Indian workforce to 500,000 in three years, shifting half of its China-based supply chain. With a focus on local value addition, Apple aims to increase domestic value addition from 11-12 percent to 15-18 percent. This move aligns with India’s growing importance as a market and potential R&D hub. Currently, local value addition in India stands at 14 percent, far below China’s 41 percent.

Clearly, for Apple, it is now firmly focussed on getting more and more iPhones on Indian hands as also progressively shipping a greater proportion of its global demand from factories from India.

For Tesla, its market lies in the tangible, visible, but still slow, shift that is taking place on India’s roads. While apartment buildings and commercial high rises will likely increasingly see shiny solar panels atop terraces, the cars that people drive will be the biggest change agents in mainstreaming electric vehicles in the world’s most populous country.

According to the Boston Consulting Group (BCG), the automotive industry is shifting toward electric vehicles (EVs) even faster than it envisioned only a year ago. With steady support from governments and leading automakers in the face of the Covid-19 crisis, the global market share of electrified cars, SUVs, and other light vehicles grew from 8 percent in 2019 to 12 percent in 2020 and has shown continued strength in early 2021.

According to a Bain and Company report, India’s electric vehicle (EV) market is at an inflection point. EVs accounted for about 5% of total vehicle sales between October 2022 and September 2023—and could reach more than 40% penetration by 2030, driven by strong adoption (45%+) in both two-wheeler (2W) and three-wheeler (3W) categories.

The Economic Survey of India 2023 had forecast a robust 49 percent compound annual growth rate (CAGR) in India’s domestic electric vehicle market between 2022 to 2030, with an estimated 10 million annual sales by 2030. Projections indicate that the EV industry is set to generate approximately 50 million direct and indirect employment opportunities within the next seven years.

Musk’s visit to China, following a cancellation of his scheduled visit to India earlier this month, may well be part of a broader global supply chain blueprint to fit Tesla’s two different pieces of a plan involving the world’s most populous nations.