
A Model 3 vehicle leaves an assembly line during a ceremony at Tesla’s Gigafactory in Shanghai in December 2019.
Photographer: Qilai Shen / Bloomberg
Photographer: Qilai Shen / Bloomberg
Elon Musk almost confirmed Tesla Inc. will enter India last week, sparking jubilation among fans, some of whom have been ordering electric cars for years. But it may be the most difficult market for the company to conquer.
The richest man in the world on January 13 tweeted “as promised” in response to a reported on a Tesla-focused blog that the automaker was in negotiations with several Indian states to open an office, showrooms, a research and development center – and possibly a factory.
“It’s really happening,” said Nikhil Chaudhary, a 20-year-old student at the University of Delhi who helped start the Tesla’s fan club in early 2019, adding that he “went crazy” on hearing the news.
Arun Bhat, 34, director of the company in Bengaluru, the city formerly known as Bangalore, was equally happy, saying that, finally, he will be able to sit behind the wheel of the Tesla Model 3 he ordered in 2016.
Despite all the hype, Tesla’s foray into India is far from being a closed deal. The company is in negotiations with state officials, but has not yet decided on an Indian basis, according to the Tesmanian blog post that triggered Musk’s response, which came after months of unfounded speculation in the local media. A Tesla representative in Beijing declined to comment.
Although India is Asia’s third largest economy and home to an emerging middle class, it did not extend the welcome mat to EVs, unlike neighboring China, where Tesla set up its first factory outside the US and now dominates the electric car sales.
EVs account for about 5% of China’s annual car sales, according to Bloomberg New Energy Finance, compared to less than 1% in India. And most market watchers expect China to outperform other countries when it comes to EVs in the short term, thanks to generous government subsidies, a yearning for greener vehicles among the country’s young and growing population and a solid recharge network. .
According to the International Energy Agency, about 60% of the world public points of slow and fast loading are in China. While Chinese automakers are launching competitive EV models and developing a diverse ecosystem, the country is “moving to disrupt the current global automotive industry landscape,” analysts at UBS Group AG wrote in a report last month.
India has been making moves, but they are not on the same scale.
In 2015, it launched a Faster Hybrid Adoption and EV (FAME) plan, with a commitment of 9 billion rupees ($ 123 million) in subsidies that cover everything from electric tricycles to buses, according to IEA. AN the second generation of the FAME program introduced in 2019 was larger, with 100 billion rupees to encourage the purchase of EVs and build a charging infrastructure.
Sticker shock
India also cut the VAT on goods and services on EVs from 12% to 5%, as of August 2019, much lower than the rates of up to 28% applied to other motor vehicles, which have drawn criticism from companies such as Toyota Motor Corp.
Read more: India has 150 million drivers and only 8,000 want electric cars
But compare that to China, where utility State Grid Corp. of China pledged to spend 2.7 billion yuan ($ 416 million) on recharging stations only in 2020. In another sign of China’s much larger commitment, the state-owned company China Southern Power Grid Co. said it plans to invest 25.1 billion yuan in charging infrastructure over four years. These expenses come after several years of heavily subsidizing consumer EV purchases to kick-start the market.
The cost will also be a major obstacle.
India’s FAME programs will not do much to help lower the price for Tesla’s potential customers, as the maximum limit for an EV to qualify for subsidies is 1.5 million rupees. Teslas will cost more than that and therefore will not be eligible, according to BNEF analyst Allen Tom Abraham.
An entry-level Tesla Model 3 built in China starts at 265,740 yuan, or about $ 40,960, while the Y model of sport utility vehicles leaves Shanghai, which can travel almost 600 kilometers (373 miles) on a charge, costs of 339,900 yuan. With export expenses moreover, the sticker on a Tesla sold at retail in India would put it out of reach for most drivers.
About 75% of all Indian car sales occur in the $ 10,000 and below range, about half the average price in China and only 25% of the average in the US. This means that even the most affordable Tesla car will likely attract only about 1% of the market, said Singapore’s Abraham. “The volumes they can expect in a market like India will be very, very small,” he said.
Manufacturing sweeteners
Still, the Indian electric vehicle market is growing and could be worth almost $ 206 billion in the next decade, according to a study by CEEW Center for Energy Finance, which noticed an investment of more than $ 180 billion would be needed by 2030 to achieve this.
And in a country as big as India, a product with a small market share may prove worthwhile for Tesla, especially due to the company’s strong brand recognition among wealthy and environmentally conscious Indians. “Education in solar energy and EVs is essential,” writes Chaudhary in Tesla India fan club website. “We have to educate people about sustainable energy. We need to tell people the positive impact on their lives. “
According to Rajeev Singh, partner and automotive leader at Deloitte India, Tesla is already a well-known name – “there is an attraction from the brand perspective” – and the luxury car segment in India is also expected to grow by around 15% over in the next five to seven years, about twice the total market, predicts Deloitte.
While it is unclear how seriously Musk is thinking about the prospect of one day making cars in India, the government is supposedly trying to attract renowned manufacturers, and Tesla would be the best match – as it was for China.
Business week: Elon Musk loves China and China loves him back – for now
Prime Minister Narendra Modi’s administration is planning to offer around 1.7 trillion rupees in incentives to attract global companies to set up the manufacture, people with knowledge of the subject said in September. The country has had some success, with about two dozen companies, including Samsung Electronics Co., Hon Hai Precision Industry Co., known as Foxconn, and Wistron Corp. committing to establish cell phone factories.
Teslas, however, are likely to be imported, at least initially. Even an enthusiast like Bhat – the director of the Bengaluru-based company who currently runs a Hyundai Kona EV – is realistic about the challenges.
“Until there is a local automaker, it will be a niche product,” he said.
– With the help of Chunying Zhang