Tesla for India or India for Tesla? Breaking down the ingredients for EV dish
- Tesla is the largest EV maker in the world. India is the third-largest vehicle market in the world.
It is that time of the year again when reports of Tesla accelerating its India progress take centerstage in the country's automotive landscape. The most-recent developments pertain to the Elon Musk-led company apparently sending a team of officials to hunt for a factory site a report suggests the company has already begun manufacturing electric cars for the Indian market from its plant in Germany. Some say it is a cat and mouse game. Others claim an electric vehicle (EV) revolution is about to begin. But mostly, it is about the hard dynamics of sheer business.
Negotiations between Tesla and the Indian government have been on for years. The EV giant has been asking for lower import rates on vehicles. The government wants commitment on local sourcing, local assembly and manufacturing, and on investments in the country. CEO Musk even met Prime Minister Narendra Modi on two separate occasions - once at the company's California factory and the second time in New York. “I am a fan of PM Modi," he would announce to reporters later.
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He may be a fan but Musk is also a businessman. And an eccentric businessman at that. Industry watchers say Tesla is well aware that EV markets around the world are batting with lower intensity than previously predicted. A few even point out that a majority of people who have purchased EVs so far - Tesla or from any other brand - are enthusiasts and affluent customers. A 2022 report in The New York Times highlights that from here on, the masses who may be out for new car purchases would be far more circumspect than the initial adopters. So, what's the point?
Tesla takes aim at world's third-largest vehicle market
India overtook Japan as the world's third-largest vehicle market. It is now only behind China and the United States although the gap is quite sizeable. The potential is enormous even if the challenges are daunting. A diverse market like India is not easy to conquer. And several American automobile brands - from Ford and GM to Harley-Davidson - have failed miserably.
But as a country which saw 4.2 million or 42 lakh cars being dispatched in the last financial year, India also cannot be ignored by a company like Tesla which eventually wants to manufacture 20 million or two crore vehicles each year across the world by 2030, up from around 1.8 million or 18 lakh deliveries in all of 2023. Ambitious much? Maybe. India in sight? Likely.
To play the volume game, Tesla cannot just bank on its existing strongholds of China, the US and select European markets. There is an overall acceptance that markets like India and those in South-East Asia and Latin America are fertile play-fields. And more affordable models would be the key, something Musk has said on record.
It is likely that in India at least, Tesla would bring in only the Model 3, its most-affordable product in the lineup. An even more affordable Tesla - one that does not exist at present - could follow later. But what is certain is that Tesla just cannot either ignore the Indian market or bring anything less than its A game here. After all, news agency PTI did point to a report by Customized Energy Solutions, an energy advisory, software and services firm, which predicts EV sales to grow at Compound Annual Growth Rate (CAGR) of 35 per cent.
India may be ready for world's largest EV player
Several governments - local and national - in many parts of the world have almost salivated at the prospects of welcoming Tesla. In 2020, Reuters reported Brazil is working on a plan to attract Tesla investments in the country. In 2023, French Finance Minister Bruno Le Maire confirmed Tesla entry into his country would be a big leg up for French EV ambitions. And bizarrely, the city of Tulsa in Oklahoma even redesigned and repainted a state monument to make it resemble Musk in order to woo Tesla.
Such instances - serious and frivolous - are numerous.
India, on the contrary and in comparison, has played hard ball. And rightly so, say many. "Government does not tailor policy for any one individual company or its interests. Everybody is free to make their demands. But that does not mean that the government will necessarily take a decision (based on) what you demand," Commerce and Industry Minister Piyush Goyal told PTI during the course of an interview. “We are working on several initiatives where we are having inter-ministerial (consultations) and a dialogue with the stakeholders, with potential investors from across the world from Europe, from the United States, from the Far East, from Japan, from Korea."
Shortly thereafter, the government here approved a new electric vehicle policy that will allow lower import tax duties on EVs. The condition? Commit to invest at least ₹4,150 crore in India and a deadline of three years to start local manufacturing of EVs.
So it is not just about bringing home a global leader in EVs. It is about what it brings, and how. Tesla factories create thousands of jobs and have the potential for rationalising prices of the final products which then takes these products to more and more people, helping accelerate EV adoption. And while revenue and profits are crucial for any company, a government needs to take a holistic approach on multiple levels and spheres. “Making in China and selling it here is not a good proposition," Nitin Gadkari, minister for Road Transport and Highways, had explained back in April of 2022.
Also Read : ‘Tesla should not import EVs from China for sales in India'
A symbiotic relationship could actually help both Tesla as well as India's EV ambitions, especially because the current electric car game here is still marginal. EVs account for only around 1.5 per cent of all car sales in India, compared to 34 per cent in China and 7.6 per cent in the US. Will Tesla models inject rocket propellers to India's EV sales? Perhaps not but there could well be a solid momentum if the company manages to assess and cater to customers here appropriately.
