Some Things For Tesla To Consider As It Moves Into India

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Arun Bhat, who is a part of Tesla Club India on Twitter, has a great idea as to what Elon Musk and Tesla can do in India. These suggestions are from the perspective of a Tesla shareholder in India who wants to buy his own Tesla.

Bhat starts off by sharing that he is hoping to get his long-awaited Tesla, which he reserved in April 2016, this year and hopes that the Model Y is also coming to India alongside the Model 3.

“It has been a breathtaking year for Tesla in spite of the troubled times the world has seen due to the pandemic. For me personally, it’s been amazing to see both Tesla and $TSLA grow. Tesla, the company, seems so much more mature now, especially with execution. It’s still agile wrt product development and manufacturing timelines,” he wrote. 

He noted that the arguments against India and the Indian market — that it is too small for Tesla, for now. While agreeing that it’s not expected that Tesla will sell in the hundreds of thousands with its current product portfolio, Tesla isn’t just about cars. “Tesla also has very ambitious goals for its energy generation, storage, and distribution products/services,” he wrote. How many times have people forgotten about Tesla’s energy business? This and its automotive side are its two main business verticals, and there’s a lot of potential for both in the Indian market. Bhat explores both realms.

Tesla India’s Automobiles Vertical

This part is divided into three stages. Bhat discusses CBU imports of the Model 3 SR+, a small assembly plant for local assembly, and a large assembly plant for local assembly of the expected $20,000–25,000 Tesla, Megapacks, and a local 4680 battery plant.

Stage 1: Completely Built-Up (CBU) Unit Imports of Model 3 SR+

Bhat explained that Tesla’s goal is to enter India and start by importing its CBU units, and that there is no distinction between gas/diesel CBU imports and electric CBU imports in terms of import duties. The import duty for a car with a value less than $40,000, he explained, is 60%, which is why the Model 3 SR+ is the only feasible option if the price is to be kept below $100,000.

There are two scenarios he shared to consider:

1. The SR+ can be imported as a CBU as is with basic Autopilot software included. The approximate cost to a customer without insurance will be as follows:

Table by Tesla Club India

Bhat noted other factors include some social welfare surcharges and perhaps other costs that he could be unaware of — these could make the above calculations higher.

2. Tesla could also bifurcate the basic Autopilot cost and the car cost (hardware). The cost of the software could be reduced in the CIF price, which is considered for import duty. This could help cut costs from import duties. Tesla India could then charge 18% GST on the software sale instead of paying 60% import duty and other taxes, as the software doesn’t have an import duty structure if sold by a domestically registered entity.

Bhat pointed out that the product will need a 15 mm increase in ground clearance and that this is very critical for the Model 3 in India. He also pointed out that Tesla’s competition for the SR+ would be the Mercedes C-Class, BMW 3 Series, and Audi A4 — each of which cost around $70,000 due to a road tax of around 20%. Tesla, being an EV, will have no road tax since there isn’t one for EVs — making the CBU Model 3 SR+ an ideal choice.

Stage 2: Small Assembly Plant for Local Assembly.

Tesla could sell a few vehicles in the $65,000–70,000 range, but the best way to make that number even lower is for Tesla to have a small assembly plant in India. Bhat explained that the duty for Semi Knocked Down (SKD) vehicles with pre-assembled battery packs, motors, motor controllers, chargers, power control units, energy monitor contractors, brake systems, and electric compressors that aren’t mounted on a chassis or a body assembly is only 15%, which is 45% lower than the 60% for a CBU car.

In the graph below, Bhat calculated an estimate of how much Tesla could cut costs using this approach. He also considered the assembly and other expenses to be a bit lower while not reducing the total cost for the SKD kit.

Table by Tesla Club India

Bhat estimated that the approximate price for the SR+ is lowered by $18,500 when assembled locally. He also noted that the Model 3 LR will cost less than $61,000 and the Performance around $72,000. The Model Y LR will be less than $66,000 and the Model Y Performance around $77,000.

Bhat pointed out that having these locally assembled will empower Tesla and make it the predominant brand in the admittedly rather small 50,000 cars/year India luxury car market. If Tesla took 25% market share, this would be 12,500 cars per year, or $652 million in revenue. “The CAPEX for the small assembly plant and Supercharger network will most likely cost less than $100 million. Hence, if Tesla has a good local team, it seems a no-brainer,” he explained.

Stage 3: Large Assembly Plant

A larger assembly plant would not only allow for the local assembly of a $20,000 to $25,000 Tesla, but for Megapacks and even a local 4680 battery plant. This is where Bhat sees Tesla having the most growth. From the previous stage, Tesla will have a better sense of the Indian market, and once that lower-priced Tesla is introduced, Tesla can make it using local manufacturing and assembly. Bhat noted the sales figures of some cars at these price levels:

  • Kia Seltos: 7,500/month
  • Hyundai Creta: 9500/month
  • Toyota Innova: 5000/month
  • MG Hector: 2500/month

When considering a total of 25,000 vehicles per month in this market, and again 25% market share, this could lead to an annual possible sales of 90,000 Teslas in the $20,000–25,000 price range. This would be close to $2.1 billion in sales. Bhat believes that the “Tesla stretch” will follow Tesla to India and noted that Tesla is highly popular with the youth. This will create more demand. And this is just the automotive side.

Tesla Energy Generation, Storage & Distribution Products & Services Vertical

Bhat pointed out that this part can be planned in the second or third stages of Tesla’s India automotive expansion. Renewable energy is currently at 38% market share (of its installed capacity) in India.

Table from India Ministry of Power

He noted that renewables are the lowest-cost power plants and that the majority of new plants in the country will be solar and wind. India is likely to add 80 GW of renewable energy capacity in the next 5 years. Bhat noted that he doesn’t see Tesla having a distinct advantage in this sector until it can make the pricing of its solar panels very competitive. However, along with high renewable energy share, large expansion of energy storage is needed. Bhat noted that grid-scale Megapacks are where Tesla will have a big opportunity in the country.


Bhat noted that Apple lost its advantage in India and allowed Samsung and OnePlus to dominate the Indian market simply because Apple was late getting an assembly plant into operation in India. He doesn’t want Tesla to make that mistake and lose its early entrant advantage.

“One cannot accelerate the world’s transition to sustainable energy and transportation by not taking along India, a country that contributes 17 % to the 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.” — Arun Bhat

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Johnna Crider

Johnna owns less than one share of $TSLA currently and supports Tesla's mission. She also gardens, collects interesting minerals and can be found on TikTok

Johnna Crider has 1996 posts and counting. See all posts by Johnna Crider