The electric vehicle giant Tesla is looking to set its foot in the Indian car market. Many Indians are anxiously waiting to see a Tesla in their neighborhood and get their hands on one. There are several challenges for Tesla in the Indian market. The company seems to be a little hesitant to launch its vehicles in India. The company has grabbed tremendous market cap in countries where it has launched its electric vehicles. Tesla isn’t sure that they will achieve the same success in India.
Update on Tesla’s much anticipated India launch
The average Indian consumer is very different than other markets Tesla has launched its cars in. Indians are very considerate about the price, efficiency, and ruggedness of any vehicle. In addition to this, nowadays Indians are preferring goods that companies manufacture in India due to PM Narendra Modi’s Atmanirbhar Bharat Mission.
There is tremendous pressure on Tesla from the Indian government to produce their vehicles in India. Recently, the transportation minister told Tesla that they couldn’t sell Teslas manufactured in China in the Indian market. The two parties are holding several talks to negotiate Tesla’s entry in India. As announced by transportation minister Shri Nitin Gadkari, Tesla started its operations in India in early 2021. The company has set up its offices in the silicon valley of India that is Bangalore.
Elon Musk had hinted at this development by a tweet earlier. Tesla focuses on the unique style, performance, and range of its vehicles. Tesla vehicles are costly which definitely won’t bode well with Indian customers. Due to this uncertainty, the company is initially launching only its most affordable car on the market that is the Tesla Model 3. Although Tesla is launching only Model 3 initially they plan to launch their full range of Models once they have a better understanding of the Indian market.
At the India Today Conclave 2021, Nitin Gadkari told the media that the Tesla Model 3 will start at 35 lakh rupees which is approximately $47000. This puts Tesla in competition with legacy automakers like Audi, Mercedes, BMW. Furthermore, these companies do not have an electric vehicle in the Indian market currently except Audi. Audi E-Tron is available in India but its price range is 1 crore rupees($130,000), substantially above that of the Tesla Model 3.
These insane prices of vehicles are due to the 100% import tariff levied on goods that aren’t produced in India. If these charges were dropped or if the companies start manufacturing their vehicles in India then the prices of these vehicles will drop significantly.
Therefore, the Indian government is asking Tesla to manufacture its vehicles in India. India is on a mission to end its dependence on oil. Due to this, the Indian government has given lots of incentives and subsidiaries to electric vehicle manufacturers, customers and other ancillary industries. The Government of India has guaranteed Tesla all the assistance it requires to start its manufacturing in India. For example, the government is willing to expedite land acquisition for Tesla factories which is a long process. Tesla hasn’t made a comment about its plans of manufacturing in India as of now.
Tesla has asked India to reduce import taxes levied on its vehicles. However, the Indian government has told Tesla that it needs to start production in India to get tax relief. It seems that the two parties are currently at an impasse. Tesla is hesitant to build a factory in India before it can understand the needs of the Indian market. Carmakers like Hyundai are also supportive of Tesla’s request. In spite of these requests, the Indian government is adamant and doesn’t want to reduce the import duty charged on goods that are manufactured outside India.
Indian automakers like TATA Motors and Ola electric are against the reduction of import taxes. They believe that if the Indian government reduces import tax it will hurt domestic manufacturing and jeopardize homegrown electric vehicle manufacturers investing large sums of money to get their electric vehicle factories functioning.
Tesla wants to test the waters before it commits to building a factory in India. The government, however, wants Tesla to devote an independent factory for the Indian market as well as for the export of its electric vehicles to other markets which are produced in India. Tesla is yet to make a decision but it will likely make one in the upcoming months. The government’s stance is unlikely to change. It is up to Tesla; they have to decide about entering the largest marketplace in the world or not enter it due to a petty disagreement with the Indian government.