Tesla may have cancelled low-cost car plans. What does it mean for India?

Elon Musk previously said a more affordable Tesla is in the works but a new report suggests that the company has now dropped the plans and will instea
Tesla Model 3
File photo of Tesla Model 3 cars parked next to each other at a company production facility in China. (REUTERS)
Tesla Model 3
File photo of Tesla Model 3 cars parked next to each other at a company production facility in China.

Tesla entering India is not about ‘if’ but all about ‘when.’ The company has reportedly sent officials to scout for a site to set up a manufacturing base here and it is learnt that it has already started manufacturing right-hand-drive electric cars at its German facility. But while it is almost certain that the Tesla Model 3 will be the first electric vehicle (EV) introduced here, the company may have pulled the plug on plans of an offering that is far more affordable than what the Americans offer anywhere at present.

A Reuters report citing three sources - who claim to have seen company messages - highlights that Tesla has ditched its plans of an EV that is more affordable than the Model 3, its most-affordable offering currently. Tesla is enormously popular the world over but its EVs aren't priced for the masses in most markets where it is present. The Model 3 starts at $40,000 (approximately 33 lakh) in the US where options like the Nissan Leaf (starts at $29,280), Mini Cooper SE (starts at $31,895) and Hyundai Kona (starts at $34,050) are considered by many as value-for-money products in comparison. In China, the world's largest EV market, the game is getting tougher because local players are extremely aggressive with how their products are priced.

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Tesla does have a cult-like fan following but it also has mammoth dreams of selling 20 million (two crore) cars world over by 2030. And while its offerings may be more capable than many comparable models, pricing is absolutely crucial in taking EVs to the masses. CEO Elon Musk himself had said he would want a Tesla EV at somewhere around $25,000 mark, even telling investors and potential future customers that a ‘Model 2’ could be offered from late 2025 onwards. As per Reuters' sources though, this isn't happening because Musk wants energies to be focused on developing robo-taxis instead.

Tesla eyes Indian shores. But what is it bringing?

Cracking the Indian automotive space is not a leisurely drive on the freeway. The country may be the third-largest vehicle market now, behind China and the US, but it is also vastly varied in terms of factors ranging from topography to customer preferences. And if volumes are what Tesla is aiming for eventually, Model 3 is unlikely to cut it even if it is locally-assembled at some point in time in the future.

Tesla will bring in its EVs via the import route initially. The Indian government's recent decision to cut import duty on EVs provided a company agrees to certain conditions, will help. But an EV with a smaller battery, shorter range and a more compelling price point could have worked for Tesla in not just India but in several emerging markets where it is not present at the moment.

Tesla battles Chinese onslaught

Chinese EV manufacturers have waged a mammoth price war and global brands are facing the heat, especially because the growth in sales trajectory for EVs has tapered.

Tesla too has announced price cuts in various markets where it is present and where it has to compete against Chinese brands. How long can Tesla fight the price war? How long should it? And should it even fight the battle? The American company is in a tight tussle against China's BYD in particular. BYD recently overtook Tesla in terms of global sales but Tesla managed to snatch the crown back in Q1 sales.

First Published Date: 08 Apr 2024, 15:59 PM IST

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