Elon Musk-owned Tesla‘s long-awaited plan for India’s debut appears to be gaining momentum after a considerable delay. The company is reportedly planning to establish a massive factory in India, capable of producing 500,000 electric vehicle (EV) units annually. According to media reports, the price of Tesla cars in India could start as low as Rs 20 lakh (~$24,356).
This electrifying development comes hot on the heels of a meeting between Elon Musk and India’s Prime Minister, Narendra Modi, during the latter’s recent visit to the United States. Modi’s charm and enthusiasm seemed to have a lasting impact on Musk, as he now appears more determined than ever to make a splash in the Indian market.
To pave the way for this ambitious venture, Tesla has been in deep discussions with the Indian government. They’re exploring possibilities of bringing their auto parts and electronics chain to India, while also seeking incentives and tax breaks.
India’s Ministry of Commerce and Industry is leading these crucial talks, aiming to strike a fair deal that benefits both sides and maintains a level playing field.
What’s even more interesting is Tesla’s long-term vision for India. Once Tesla establishes its stronghold in India, the company has set its sights on turning the country into a formidable export hub for the Indo-Pacific region. That’s right – Indian-made Tesla cars could soon be cruising the roads of neighbouring countries, showcasing the nation’s prowess in the EV industry.
Insiders, speaking in hushed tones, revealed that Tesla’s audacious plan has generated a wave of optimism. They firmly believe that this time, Tesla’s Indian dream will become a reality, thanks to the inclusion of local manufacturing and exports. It’s an exciting prospect that promises to boost India’s economy while placing Tesla firmly in the driver’s seat.
As the news broke, Indian media wasted no time reaching out to Tesla for a comment, but the company’s response remained elusive.
Tesla Eyes Indian Market: 2017-2023
The road to Tesla’s Indian adventure hasn’t been smooth. The company has been eyeing India since 2017 but has faced numerous obstacles along the way. One of the main challenges has been the heavy import duty imposed by the Indian government, coupled with their preference for local manufacturing over imports. Despite initial discussions and visits, Tesla has struggled to make significant progress in India.
In 2015, Prime Minister Narendra Modi visited Tesla’s factory in California, expressing his desire to establish a manufacturing plant in India. However, Tesla ultimately decided to build a factory in Shanghai, China, which became operational in 2020 with the production of the Model 3 sedan.
In 2018, Elon Musk once again expressed his interest in entering the Indian market, but government regulations and challenging conditions forced him to put those plans on hold. Musk cited the tough government regulations as a significant hurdle in bringing Tesla to India.
In 2020, Tesla initiated discussions with government officials of Karnataka to open a research and development facility in Bengaluru.
In January 2021, Tesla finally made some headway by registering as a company, “Tesla Motors India Private Limited,” in Bengaluru. This move indicated renewed efforts to navigate the Indian market.
In July 2021, a well-known YouTuber approached Elon Musk and inquired about the estimated time of arrival for Tesla cars in India. Musk’s response shed light on the challenges the company has faced. He expressed his desire to bring Tesla to India but cited the heavy import duties as a major hindrance to their debut in the country. According to Musk’s tweet, India imposes the highest import duties on imported cars among large countries worldwide. He also voiced his dissatisfaction with India’s treatment of clean energy vehicles, which are treated similarly to conventional diesel or petrol cars, contradicting climate goals.
Tesla has actively been lobbying for import duty exemptions in India, but their efforts have not yet yielded any success. If India were to accommodate Musk’s demands, it would require eliminating the import duties of 60% on EVs costing $40,000 or less and 100% on cars with CIF (Cost, Insurance, and Freight) prices above that threshold. Since Tesla’s pricing falls within the 100% import duty bracket, it becomes challenging for the company to manufacture and sell cars in India at a competitive price point.
However, it seems that both Tesla and the Indian government are ready to find common ground and embark on a mutually beneficial journey.
In 2022, Tesla abandoned its plans due to a failure to obtain special incentives from the government for importing vehicles at lower duties. The Modi government has maintained its stance that Tesla must manufacture vehicles locally instead of importing them, particularly from China.
According to a senior government source cited by the Economic Times, Tesla has not yet applied for benefits under the Production-Linked Incentive (PLI) schemes offered by the Indian government. The source mentioned that while Tesla could potentially avail benefits for manufacturing advanced chemistry cells, the company is seeking concessional duties without demonstrating a commitment to local production.
For those who are unaware, India has implemented various government schemes, including the PLI scheme, to incentivize automotive and parts manufacturers to establish local production using domestic resources and talent. These schemes aim to support all stakeholders and discourage outsourcing domestic jobs to foreign countries for cost-saving purposes. As of 2022, around twenty companies, including Hyundai Motor India, Suzuki Motor Gujarat, and Mahindra & Mahindra, have already submitted investment proposals under the PLI scheme.
Tesla’s dialogue with the Indian government resumed in May 2023 when a team from the company visited India. Early this month, in June 2023, Elon Musk met PM Modi in the US. During this meeting, Musk openly expressed his admiration for Modi and revealed that their discussion had further inspired him to increase Tesla’s investments in India. This positive interaction between Musk and the Prime Minister signifies a renewed commitment from Tesla towards the Indian market.
“He (Mr Modi) really cares about India because he’s pushing us to make significant investments in India, which is something we intend to do. We are just trying to figure out the right timing … I am confident that Tesla will be in India and will do so as soon as humanly possible,” Musk said on June 21, 2023.
EV Sales in India: Tesla Can’t Ignore For Long
Tesla’s potential move to establish a presence in India aligns with its global corporate strategy of diversifying its production bases beyond China.
The impact of the Covid-19 pandemic and the US-China trade war has prompted numerous US companies, spanning smartphone manufacturers, retailers, and electronics, to explore alternatives beyond China for establishing their manufacturing facilities.
In this context, India emerges as an attractive destination due to its vast population, ranking as the world’s largest and second-largest market for smartphones and internet users. With significant untapped potential, India presents a compelling market opportunity for these companies to expand their operations and tap into the growing consumer base.
Additionally, India’s thriving car market presents a massive opportunity for Tesla. As the world’s fourth-largest market, following China, the United States, and Japan, India has a substantial demand for automobiles. With sales of nearly 3.9 million units last year, the Indian automotive landscape is a playground waiting to be conquered. Furthermore, the sales of electric vehicles in India have skyrocketed 174% YoY, from 455,773 units in FY 2022 to 1,247,120 units in FY 2023. This surge in EV sales indicates a growing acceptance and demand for sustainable transportation options in India.
Another report reveals that in the first half of 2023, the retail sales of electric vehicles in India surpassed the 700,000-unit mark to reach 721,971 units. However, it is noteworthy that electric cars and SUVs accounted for a modest share of 5.31%, amounting to 38,359 units. This indicates that there is a big window of opportunity for Tesla and other electric vehicle car manufacturers to launch their advanced high-tech cars at affordable prices. It also depicts an exciting opportunity to capture a larger market share and expand its customer base. Moreover, the introduction of electric vehicle manufacturing facilities in India has the potential to generate employment opportunities. It’s a win-win for both.
In the world of four-wheeler electric vehicles in India, a captivating landscape unfolds, with Tata Motors reigning supreme as the dominant force. Yet, amidst this electrifying domain, both Mahindra and Hyundai have deftly switched gears, accelerating their efforts to seize a substantial slice of the market. Their aim is clear: to secure a commanding position before the imminent entry of other formidable contenders, most notably the illustrious Tesla, whose impending sales debut in the country has generated tremendous anticipation. The stage is set for an exhilarating competition as these industry giants vie to shape the future of India’s electric mobility revolution.
Interestingly, if Tesla’s plan to set up its own manufacturing plant in India comes to fruition, it would provide a significant boost to the Modi government’s Make in India initiative. This initiative aims to attract investment and promote domestic production, with companies like Samsung, Apple’s vendors already making substantial investments in India and using the country as an export hub.
Revamping Tesla’s Pricing Strategy
Tesla, taking a page from Apple’s book, knows how to play the game of exclusivity. Their premium pricing strategy targets the privileged few rather than the masses. It’s intriguing to note that despite offering four remarkable electric car models, Tesla has yet to make affordability a priority or achieve Musk’s oft-repeated goal of reaching the mass market. Luxury remains their focus.
The Tesla Model X steals the show as the priciest option in their lineup, commanding a starting price of $98,490 in the US, £98,980 in the UK, and €113,490 in Europe. The iconic Tesla Model S follows suit at $88,490 in the US, £91,980 in the UK, and €105,490 in Europe.
Now, if you’re in the market for a more pocket-friendly option, the Tesla Model Y might catch your eye, starting at $47,490 in the US, £44,990 in the UK, and €41,990 in Europe. Finally, there’s the Tesla Model 3, an entry-level luxury vehicle that comes in at $40,240 in the US, £42,990 in the UK, and €41,990 in Europe.
Therefore, in order to seize the vast potential of the Indian market, Tesla must revisit its pricing strategy. India’s reputation for being price-sensitive is legendary, whether it’s smartphone purchases or clothing. As a result, global companies strategically introduce their products at affordable price points, specifically targeting the mid and lower segments of the Indian population. Tesla is set to follow suit.
One of the most thrilling aspects of Tesla’s entry into India is the price point. With their EVs potentially starting at a mind-blowing Rs 20 lakh (~$24,356), Tesla aims to shatter the notion that electric vehicles are only for the elite. This tantalizing affordability could be the game-changer that ignites a nationwide EV revolution, encouraging more Indian buyers to embrace sustainable transportation.
The Rs 20 lakh price tag for Tesla’s EV cars could be a powerful magnet for customers, considering that electric vehicles are generally priced much higher.
The price gap between EVs and conventional internal combustion engine (ICE) vehicles remains significant but gradually narrowing. Industry insiders believe that declining prices could drive more Indian buyers toward EVs.
Intriguing data from Jato Dynamics in April 2023 reveals a fascinating trend. A few years ago, electric passenger vehicles were a hefty 137% more expensive than their petrol counterparts. However, the tides have turned, and that gap has now narrowed to a compelling 73%. As EV prices continue to decline, the scales are tipping in favour of these eco-friendly marvels, captivating the hearts and minds of Indian consumers.
Overall, Tesla’s increased focus on India presents a promising opportunity for both the company and the Indian government, contributing to the vision of boosting domestic manufacturing and establishing India as a key player in the global electric vehicle market.
Tesla Car Sales Worldwide
Founded on July 1, 2003, Tesla, Inc. (NASDAQ: TSLA) is one of the world’s most valuable companies and most valuable automaker, with a market capitalization of $584.7 billion as of May 2023.
In the first quarter of 2023, Tesla secured the second spot in the global electric vehicle market, capturing a notable 16% market share.
The second quarter of 2023 proved to be exceptional for Tesla, as it experienced a remarkable surge in overall vehicle production. The company reported a remarkable 85.5% YoY and an 8.8% QoQ increase in global EV car production, totalling 479,700 units. On the other hand, Tesla achieved a record-breaking milestone in electric vehicle deliveries, with 466,140 units, showcasing an astonishing 83% YoY and a 10.2% QoQ growth.
So, whether it’s conquering the market, surpassing production expectations, or shattering delivery records, Tesla is clearly revving its engines to unleash its full potential and dominate the electric vehicle race.
Will the long-awaited partnership between Tesla and India come to fruition? Only time will tell, but one thing is sure: the Indian market holds immense potential for Tesla, and they’re revving their engines to seize the opportunity.
