ulaunch explains Tesla’s Entry in India

What has happened?

• Elon Musk led Tesla has finally entered India after years of speculation.
• The US electric vehicle giant has registered as Tesla India Motors and Energy Pvt Ltd with the Registrar of Companies (RoC) in Bengaluru. Vaibhav Taneja, Venkatrangam Sreeram and David Jon Feinstein have been appointed as directors of Tesla India.
• The Electric Vehicle (EV) company will also set up an R&D centre in Bengaluru.

What will be the Tesla’s first offering & when will it hit the market?

• Tesla’s first offering for India is expected to be the best selling Model 3 electric sedan. It is expected to be launched by June-July 2021.
• The company has also said to initiate pre-bookings on the car from January 2021.

What are Tesla’s main advantages over its competitors?

• It is agile, nimble, and flexible to cater to the emergent needs of the customers compared to the larger legacy players.
• Due to high integration of software in its cars, it can upgrade the features for users every few weeks. Conventional cars do not offer such features.
• It utilises the direct sale model over the franchise model, thus putting the customer in control. They can easily buy the car online.
• It has built its model around green mobility and shifting customers preferences towards tech and sustainability.

What avenues does the Indian market have for Tesla?

• India is the world’s fifth-largest auto market.
• India’s commitment to addressing climate change, adopting renewable energy and building smart cities provide ample market for electric vehicles.
• Tesla’s entry is expected to give a boost to the EV segment.

What are the major challenges Tesla can expect in the Indian market? 

• High price bracket.
  • With prices likely to start from Rs 55-60 lakh, it will be affordable to only a handful.
  • This will not bring real electric revolution to the country.
• Business model related issues
  • Lack of skilled service personnel: People need to be trained and upskilled to repair the EV car in case of malfunctions.
  • Softwares installed in cars are prone to cyber-attacks.
• Lack of infrastructure
  • There are less than 500 electric vehicle charging stations in India when the current need has been pegged at around 2,600.
  • In sharp contrast, China has more than 5 lakh charging stations.
• Tax and Regulations
  • India has one of the highest tax rates on cars globally. Currently, the effective tax on vehicles can reach up to 50%.
  • Due to this several U.S. brands like General Motors and Harley Davidson have quit the Indian market in recent years.
  • However, India’s tax structure, which has kept Tesla away, is changing rapidly to facilitate the shift to environment-friendly cars.
• Fierce Competition
  • Maruti boasts a 54% market share in private 4 wheeler segment and Tata Nexon has helped Tata Motors command an EV market share of 62% during the first quarter FY 2020-21.
  • Other dominant players like Mahindra & Mahindra and startups like Pravaig Dynamics and Tork Motors are on an upwards trajectory.

Road Transport Minister Mr Nitin Gadkari had said: “India is going to become a number one manufacturing hub for automobiles in five years”. More than 75% of vehicles on Indian roads are two-wheelers. Thus Tesla should consider reshaping its strategy for India and other Asian countries, to make a significant impact. The price-driven Indian market might provide new challenges to Tesla. Moreover, the disconnect between the policy and groundwork results in uncertainty for large investors in India. Indians have been eagerly waiting for the trailblazer Tesla to enter the Indian market. And now, since it has finally arrived, many fans wish it doesn’t suffer the similar fate of Harley Davidson and General Motors in India.

Is Tesla India-ready?
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Researched and written by Dharshan V, Team ulaunch.