When Elon Musk – the charismatic chief executive officer of American automotive giant Tesla Inc – announced the company’s first ‘affordable’ car, the Tesla Model 3, in 2016, an orders page was also opened for India. Indian technology entrepreneurs rushed to place orders. There was hope that the electric car manufacturer would soon kickstart its operations in India. After all, Musk had announced in 2015 that Tesla “would consider” building a battery plant in India.
The carmaker had set up shop in Bengaluru in 2021 with an office and even brought some vehicles to be tested on Indian roads. However, it soon put its plans to sell cars in the country on hold after the government repeatedly rejected its pleas for reduced import duty. At the time, other carmakers had commented that Tesla needed to play by the same rules as they did. While some special imports of Tesla vehicles have come to India, these are by enthusiast (and extremely wealthy) owners. Since then, Musk has gone on to buy social media platform Twitter and, well, managed to irritate one of the people who placed an order for the Model 3, entrepreneur Anupam Mittal, who was so upset at his ‘blue tick’ being taken away that he ‘cancelled’ his order.
Maybe the Shark Tank India judge thought he wouldn’t see the car anyway, but he might have acted hastily. Recent Reuters reports claim that senior Tesla officials came to India to meet the government, and unlike previous times, the company did not ask for import duty sops. While it would be presumptuous for anybody to predict what Musk is thinking about India, there are a few points to ponder.
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Tesla not the only market force in EV segment
See the success of fellow American technology giant Apple in India in the past few months. Chief executive officer Tim Cook received the full Atithi Devo Bhava treatment during his visit to India a few weeks ago, on the occasion of Apple’s 25th anniversary in India. But it is important to note that his company’s success is not predicated on sales; the technology firm is shifting more and more of its manufacturing to India and getting more and more of its subcontractors to work here. It appears now that even the Tata conglomerate will soon get involved in manufacturing Apple devices.
Can Tesla possibly do the same? That remains to be seen, but as a previous column noted, the rise of domestic electric car companies in the China market – something that became apparent at the recent ‘Auto Shanghai’ show – might leave Tesla with no option but to expand to the world’s third largest car market – India. The country’s automobile segment saw record growth in 2022-23, with 3 million units sold in the April to January period. However, it is a small fraction compared to China’s 27 million unit passenger car sales in the same year. Several popular models, such as the Toyota Innova Hycross, have over 9-12 month waiting periods. Tesla has gotten involved in a price war in the Chinese market by offering its vehicles at attractive ‘discounts’. While demand for Tesla vehicles remains robust in China, new models from BYD and Nio could make things challenging for them.
India is, however, a minuscule market for electric passenger cars. Even with Tata Motors’ recent success in March 2023, the best month for electric car sales in India yet, only 8,520 electric cars were sold in India, according to available data. In the same month, Tesla alone sold 76,663 units in China. Incidentally, sales for electric vehicles declined substantially in India in April 2023 to just 5,810 units. In addition, most EV sales in the country are for smaller vehicles, such as the Tata Tigor and its commercial variant, the XPRES-T, a popular electric taxi in major metropolitan areas. The Tata Nexon EV Max, the most popular EV for private car owners, ranges from Rs 16.5-19.5 lakh. The entry-level Tesla Model 3 in China costs over Rs 27 lakh at current exchange rates. And that is for a locally-manufactured model at the company’s gigantic facility outside Shanghai that can make nearly a million cars yearly.
Tesla, or any other electric car manufacturer, will require scale and size to achieve affordable prices. Although Ola Electric is trying very hard, India is yet to achieve scale on electric two-wheelers, the fastest-growing segment in electric vehicles. Mercedes-Benz India – the first luxury carmaker to start assembly (through parts and components) of EVs in India with the EQS 580 sedan at Chakan outside Pune – said in a statement that came directly to me that “any reduction of import duties for ICE (internal combustion engines) or BEV (battery electric vehicles) will give an additional impetus for the introduction of new technologies and products for the Indian consumer.” Pretty clear that any sops given to Tesla will have to be given to other brands as well, and with Free-Trade Agreements (FTAs) with the EU and UK currently stalled, chances of an import duty reduction seem non-existent.
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India has a dearth of affordable EV options
However, one reason people have not started buying electric cars en masse in India is that they see no options that tick most of the boxes. The MG Comet seems to have divided opinions given its dimensions; a school friend is considering the Citroen eC3 as a city runabout. But other than the Hyundai IONIQ 5, which costs close to Rs 50 lakh, there are no real, viable options for those who want performance, range and creature comforts. The sweet spot might well be in the Rs 20-25 lakh bracket. If Maruti-Suzuki brings in the EVX – the vehicle they showcased at the Auto Expo this year – in that price bracket, and if Hyundai, Kia, Mahindra and Tata bring in cars at that price point too, the segment could finally take off.
But is Tesla worth it? In January 2020, I visited Seattle, where I stayed with my brother-in-law Raghav. He picked me up from the airport in his then-brand-new Model 3, and couldn’t stop raving about the car. As I drove it downtown later that day, he showed me the car’s ‘piece-de-resistance’ – autonomous driving. And I was flabbergasted; it works. I’m not sure if it will work on Indian streets, but it clearly does in the Pacific Northwest. However, while the interface was very high-tech, I have driven other EVs, such as the BMW i4 and Kia EV6, that feel much nicer inside and outside, since then. And the latter two I drove in New Delhi. Personally, I would love it if Tesla came to India, but make no mistake; they are not coming to India out of generosity. They’re coming to India because of market potential.
@kushanmitra is an automotive journalist based in New Delhi. Views are personal.
(Edited by Zoya Bhatti)