US-based electric car manufacturer Tesla will finally make its debut in India this year.
India’s minister for road transport and highways recently confirmed that Tesla will start offering its cars to Indian consumers this year. The car manufacturer will initially import and sell cars, but is expected to eventually start production locally.
According to media reports, Tesla’s most affordable car, the Model 3, is expected to cost Rs 5.5 million ($75,250) after accounting for the high import duties. Two electric cars available in India are the Hyundai Kona EV and MG Motors ZS EV. They cost around Rs 2.5–3.0 million ($34,200–41,000). Neither of the two cars have managed to make their presence felt in India’s nascent electric car market. More affordable models like those offered by Tata Motors and Mahindra and Mahindra, that cost around Rs 1–1.5 million ($13,700–20,500), are much more popular.
It is, thus, unlikely that Tesla will be able to have any mass market impact in India. However, that’s exactly what it should aim for if India is to be a major market for Tesla. Also, while the mid-priced Kona EV and ZS EV may not be seen as good enough value for the money, the much higher priced Model 3 could pull in many luxury car buyers who are enthralled with Tesla’s tech, performance, and style.
Most of India’s leading car manufacturers have so far been hesitant to launch affordable electric cars. Maruti Suzuki and Honda are looking at mild and strong hybrids before taking the leap to pure electric cars. However, given the low market share of Tata Motors and Mahindra and Mahindra, these companies have so far failed to utilise their early mover advantage.
Tesla has been in talks with local governments to set up manufacturing units. However, foreign investment laws have so far prevented it from making any major progress in that regard. India requires 30% local content requirements for foreign companies. This requirement delayed plans of companies like Apple and IKEA to open shop in India. However, IKEA has now opened a number of physical stores and also offers its products online. Also, the Swedish company now expects to exceed the 30% local content requirement. Tesla can hope for a concession from the Indian government for the local content requirement as was offered to Apple, which recently launched its online store in India and is expected to open physical stores soon. Apple is also believed to have been offered incentives for production of iPhones in India.
Tesla has tried to enter the Indian market a few times in the past, but now the situation has turned in its favour. India is looking to attract investment in its manufacturing sector to boost its economy and counter China’s dominance. Tesla should make the most of this opportunity and its immense fan following in India to grab the early mover advantage.
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