Examining the reasons, possibilities, and outlook for Tesla's aspirations in India.
After two previous unsuccessful efforts, the announcement of EV powerhouse Tesla entering India has the ears buzzing once more. According to reports, Tesla has started manufacturing cars that it plans to import into India after meeting with Prime Minister Narendra Modi. The company is also looking for possible sites to establish a factory, though neither Musk nor any other sources have verified this.The Indian government implemented a policy in March 2024 that allows EV manufacturers to import fully constructed electric vehicles, also known as CBUs, for a 15% customs duty rate for a five-year period.With a maximum import cap of 8,000 units annually, a foreign EV manufacturer is permitted to import up to 40,000 units at a reduced custom duty rate of 15% under this scheme. The manufacturer must establish a factory in India and invest $500 million for the transaction to be successful.
The bigger advantage is that Tesla will be able to improve India's EV supply chain, even though its initial plans call for importing vehicles from its Berlin factory. With about $1 billion in vehicle parts sourced from India in 2023, Tesla has so far made use of the country as a component stronghold. components such differential hubs, castings, and plastic parts, among others.It's more likely that Musk will keep mining India for parts, using the country's five-year policy to measure consumer interest and see if India can successfully function as an export hub for Tesla's low-cost vehicle that hasn't been manufactured yet, especially since US President Donald Trump has voiced his disapproval of Musk establishing a factory there.
But why Musk has chosen to accelerate Tesla's long-dormant India activities is a question that needs to be answered. Musk's intentions to visit India were abruptly canceled earlier this year, with little sign that negotiations will resume, despite a favorable policy environment that let Tesla to import cars at reduced customs duties. However, Tesla has now posted 13 new jobs in Mumbai and Delhi.What factors might have influenced the events leading up to Tesla's scheduled arrival in India?
Global sales of Tesla are declining.
The fact that Tesla is seeing a significant slowdown in sales, not just in the US, which remains its largest market, but also in nations like the UK, Germany, and France, is one of the main causes of Musk's reversal regarding the Indian EV market. Particularly severely impacted were sales in the last two nations. Tesla's sales in Germany and France fell by 59.5 and 63.3%, respectively, in January 2025. Tesla's stock fell 11% earlier this month, and it looks like its second major market, China,In January 2025, sales in Tesla's biggest non-US market fell 11.5% year over year.
The causes are numerous and not just related to Musk's political beliefs. Sales of EVs are declining globally, and Tesla hasn't been able to outperform its rivals thanks to its older vehicle lineup. This is partly because Tesla has been concentrating more on redefining itself as an AI-driven, robotics-driven automaker.
Models such as the Cybertruck, which sold in large quantities in the US at first, have not held up over time. Due to its size, design, and noncompliance with road safety regulations, the Cybertruck has also encountered significant regulatory obstacles in markets such as the UK, Japan, and EU region.Together with other dependability problems typical of Tesla vehicles and growing competition from automakers like BYD, VW, and Hyundai, this has made it clear that Tesla no longer has the advantage it previously had.
Should Tesla make its debut by the second quarter of this year, it will do so at a time when its brand cache is at an all-time low, with rivals copying its moves and customers shunning Musk due to his political views. India continues to be the market where Tesla's halo effect is most pronounced. Although there will undoubtedly be pent-up desire for the Tesla brand, it is unclear whether this demand would be particularly important in a narrow market like India.even a Tesla Model 3 base model will be considered a luxury car.
An entry-level Tesla Model 3 will cost about ₹44.2 lakh (ex-showroom), even with the import duty fixed at 15%. Despite having a strong brand cache in India and pent-up demand due to the Model 3's price tag of ₹65 lakh, Tesla will have considerably fewer takers if local manufacture is not promised at a 70% import charge. Despite brand cache, rivals like Mercedes-Benz, Hyundai, Kia, BMW, and Audi can provide much more durable vehicles at that price range. Furthermore, Tesla's self-driving technology won't provide it an edge over rivals due to regulations.
bolstering the supply chain
Overall, the ecosystem as a whole benefits from Tesla's arrival into India. According to reports, a number of vendors are already looking for sites in Tamil Nadu and Gujarat. Since Tesla's entrance will draw more European high-end component companies, the EV supply chain will be stronger than before. Musk must, in any event, abide by the regulatory framework that permits lower tax imports only if local manufacture and 50% local component sourcing are promised.
Tesla wants to get more integrated into the Indian market and make it a more significant component of its worldwide operations, even if it hasn't explicitly stated any plans to establish manufacturing there.
EV adoption in India may be accelerated by Tesla's unintentional strengthening of the EV supply chain, if not by direct sales.
Models of Tesla are still being developed.
Let's be honest, Musk has before made an announcement but failed to follow through. The much-anticipated second-generation Tesla Roadster has not yet arrived, and the Cybertruck's introduction was beset by serious delays. Musk's promises that fully autonomous tech roads will be legal in the US are far from credible, and even the Cybercab that was unveiled last year is still a ways from being ready for production.
It will be some time before a Model 2-level product that costs less than ₹21 lakh is ready for production, even if Musk utilizes his power in the present US administration to overcome regulatory obstacles. In recent years, Tesla has taken a lot longer to release its goods, even though the average time from idea to manufacturing for a Tesla model has been more than three years. Although Musk was on the right track with the Cybercab, it would be naive to think that it would be ready for production by 2026, according to Robin Zeng, CEO of CATL, a Chinese battery giant and supplier to Tesla. Tesla would have to produce a Model 2 car on a never-before-seen scale, which would probably take a long time.
Due to supply chain problems in China and delayed deliveries in markets like Europe, even current versions like the Model Y have experienced significant delivery delays.
Is a network of superchargers necessary for Tesla to function?
The big question still stands. Even while Tesla's job postings for India indicate that the company intends to build a robust customer support network there, the country's demand for premium EVs is still shockingly low for the third-largest automobile market in the world. Out of more than 14,000 cars sold between January and September 2024, Mercedes-Benz India, the established market leader in the luxury segment, only sold 800 EVs.
Despite the fact that luxury EV demand is increasing in India, Tesla's EV sales will fall well short of the 8000-unit ceiling. Additionally, there has been no discussion about building a nationwide network of Superchargers, which is essential for all Tesla customers and a key factor in the company's success worldwide. Tesla would need to assist with the installation of "Superchargers," its exclusive line of rapid DC chargers, at least on India's major highway networks, if it hopes to significantly speed up the country's EV adoption.
Teslas will remain merely a decorative element on Indian roadways till that time. Although Tesla may provide much-needed stimulation to the Indian EV sector,The systemic problems that are stopping EVs from selling in greater quantities may take a lot longer to resolve, possibly even increasing the allure of EVs.
0 Comments