Tesla, the renowned electric vehicle (EV) manufacturer, is on the brink of entering the Indian market after years of speculation. This potential debut marks a significant moment in India's evolving automotive landscape. Despite the anticipation, Tesla faces unique challenges, including the country's terrain and competitive market dynamics. India's government is keen on attracting Tesla, offering substantial incentives to facilitate its entry. Yet, Tesla's low ground clearance vehicles and high price points may pose hurdles in a price-sensitive market where local players dominate.
India currently hosts approximately 25,000 charging stations nationwide, a critical infrastructure component for EV adoption. The Indian government has made concerted efforts to attract Tesla and other global carmakers by slashing import taxes on EVs. This policy shift aims to encourage manufacturers to invest $500 million and initiate local production within three years.
"Quite clever, as it forces a global player to localise – which is the way the game works: come and build in India," stated Sorabjee.
The domestic EV market in India remains relatively small, with EV sales accounting for less than 3% of overall passenger vehicle sales. Tata Motors leads this market with over 60% share, followed by MG Motors at 22%. Despite these numbers, the entry of Tesla has been met with enthusiasm from Indian EV manufacturers.
"We welcome competition," said Rajesh Jejurikar, Mahindra and Mahindra's Executive Director and CEO.
Tesla's entry into India will place it in direct competition with higher-end EVs from Hyundai, BMW, and Mercedes. The Indian government has ambitious plans to increase EV adoption across various vehicle categories by 2030. These include a target for 30% of private cars, 70% of commercial cars, 40% of buses, and 80% of two and three-wheelers to be electric. To support this vision, most provincial governments have established tailored EV policies to boost demand and supply.
While India's government offers the highest subsidies on electric cars among major economies, according to HSBC Securities, Tesla's base model price in India—about $40,000 (£31,637)—is significantly higher than domestic alternatives. This price disparity may challenge Tesla's ability to capture the budget-conscious segment of Indian buyers.
The import duty for EVs stands at 15%, which HSBC reports as "much lower" than the tax levied on comparable combustion engine cars in India. However, Hormazd Sorabjee, editor of Autocar India magazine, highlights a structural challenge for high-end global OEMs:
"It's been a challenge even with other global original equipment manufacturers (OEMs) at the high end with small volumes. You can't justify these major engineering changes."
Despite these challenges, Tesla's impending entry is seen as a positive development for India's EV ecosystem. It aligns with the country's broader push towards sustainable mobility solutions and increasing consumer awareness about electric vehicles.