Tesla Needs To Come To India

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By Arun Bhat S

April 2016, having seen the Tesla Model 3 being revealed by Elon Musk via the live stream, I was tempted to reserve one as soon as I saw that reservations were open to Indian buyers too. I pulled the trigger on 7th April 2016 and reserved a Model 3.

Since then, our Unofficial Tesla Club India website and twitter page have been used to spread the good word on Tesla, its offering, its advantages, and the works. Now in October 2019 and with no clear roadmap for Indian buyers to get a Tesla, I am confused and disappointed. I bought the Kona Electric as soon as it was available in India in August 2019, as I had to satisfy the need, the need to drive electric, and Tesla was meandering in its India plans. I felt neglected (oh, the sense of self importance) and thought of cancelling my reservation a couple of times, but was never able to, seeing all the progress Tesla and Elon were making in shaking up the whole automobile landscape. I know $1000 is nothing to Tesla in the grand scheme of things, but I believe in Tesla and want to support the company in my small way. I, being an eternal optimist, hope Elon sees the potential of Indian market and what clean transportation and battery storage will do to India. Tesla should not delay entering India. This is my attempt to convince Elon.

I have no real data to know how many people have reserved the Model 3 in India, but from the publicly available articles I assume it must be more than a hundred. Hyundai was pleasantly surprised with its initial allocation of 350 Kona EVs all being sold out in India in 2 months. The Kona EV, introduced as a “completely knocked down” (CKD) kit unit in the base 39.2 kWh spec, costs approximately between $35,200 and $38,250, depending upon which state of India one buys one.

India, like most countries, has its extreme wealth gap and a huge, aspirational, burgeoning middle class. Luxury cars are one of the fastest growing segments in the market.

The approximate primary luxury car market is about 40,000–42,000 cars per year and growing. This segment is where Tesla will slot in. Tesla, with its unique tech-focused EV proposition, can easily dominate this market and corner at least a 25% market share (i.e., more than 10,000 cars per year if a proper strategy is in place). Even as of the 2018 fiscal year, Tesla sold its cars in many markets with sales sub-10,000 per year. Yes, there are challenges with regards to import duties, but there are advantages too, like zero road tax for EVs in many states and GST at 5% vis a vis 28% for an ICE car. Tesla simply can’t be a late entrant to India.

Let’s consider Model 3 in its 3 trims (4 if base variant considered) versus the cars it’s competing with (i.e., Mercedes C-Class, BMW 3 Series, and Audi A4) — all prices in USD.

As clearly visible from above chart, a SR+ CBU fully imported is at a cost advantage to all the 6 variants of the competitors even after including a whopping 60% import duty. A local basic assembly plant will be the most attractive solution for Tesla buyers and Tesla itself, as even a Model 3 Performance will be on par with the competition’s non-performance models. CKD kits, which include disassembled battery packs, electric motor, and braking system, among other parts that are not mounted on the chassis, will attract 10% duty, while pre-assembled packs will attract a 15% import duty.

I have considered pre-assembled packs above for Tesla CKD at 15% duty for this calculation. At an estimated 10,000 units sold per year to begin with, Tesla can expect revenue of a cool $500 million. This should warrant a very serious decision by Tesla and Elon to set up a basic low-cost (tent would do!) assembly plant in India.

In India, I am of the opinion that for the youth and the ever aspirational middle class, a car is not a necessity to go from point A to B , it’s a lifestyle decision and it’s about the ownership experience. There exists no serious viable luxury EV competition to Tesla. Tesla is like a modern smartphone on wheels with its OTA (over-the-air) updates, Autopilot, brilliant infotainment system, and too many other things that the competition lacks.

Elon, one cannot accelerate the world’s transition to sustainable energy and transportation by not taking along India, a country that contributes 17 % to global population and 4.5% to global income (PPP terms). Tesla should be at the forefront of EV revolution in India, as it has been elsewhere in the world. Hope you agree!

Arun Bhat S
An eager 2016 Indian Model 3 reservation holder
Tesla Club India

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