Tesla and BYD unlikely to disrupt Indian car market, projects a study

Tesla is nearing its much-awaited India entry, which has been making quite some ripples in the country's auto industry. The electric carmaker that has been facing sales crunch in several key markets globally is aiming to tap into the huge growth potential in the Indian electric passenger vehicle market. However, it is unlikely to create a major disruption in the medium term, claims a study by financial services company Anand Rathi. The report also stated that Chinese EV giant BYD too won't be able to disrupt the Indian PV market.

The report has highlighted that global automakers like Tesla and BYD face multiple challenges in penetrating the Indian PV market, while new entrants like VinFast and JSW MG Motor have limited competitive impact. It has cited four key reasons for restricted competition, which are a stringent electric vehicle policy, challenges in securing investment approvals for Chinese firms, a small electric vehicle market with just two per cent penetration, and the long product localisation cycle of two to four years for global automakers.

Tesla EVs' price point to be a key factor

Despite being a major electric carmaker globally, Tesla lacks an affordable car lineup suitable for the Indian market. Even the most affordable Tesla car, the Model 3, comes priced from $30,000 in the US, which translates to over ₹26 lakh minus import duty and other taxes, while most of the electric passenger vehicles sold in India are priced under ₹20 lakh.

Other Tesla cars like the Model Y, Model S, and Model X are priced even higher. This high pricing makes their widespread adoption in India unlikely. Moreover, Tesla has not yet launched its much-anticipated low-cost model, which is supposed to be christened Model 2, to cater to emerging markets.

BYD too unlikely to get a strong foothold

Despite being a rapidly emerging global automotive powerhouse, BYD is unlikely to gain a strong foothold in the Indian market, believes the report. A key reason behind this is India's strict foreign direct investment (FDI) restrictions, especially for Chinese companies due to the geo-political relations between the two countries. The report has cited this as a key reason behind the competition from Chinese automakers in India remaining minimal.

It stated that auto companies like BYD and MG have struggled to gain a foothold in India. MG's market share in India remains low at just 1.5 per cent in FY25, primarily due to investment restrictions and its limited focus on electric vehicles, which still account for a small fraction of the market.

Chinese FDI in India is subject to strict approvals (PN3 clearance), allowing only limited joint ventures. This regulatory hurdle has largely kept Chinese automakers from entering India in a significant way, stated the report.

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