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Tesla Might Be Coming to India, but Not to Sell Cars

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Consumers have long been waiting for Tesla’s (TSLA) Indian debut. However, there have been a few hiccups. When asked about the company’s India plans this month, Elon Musk tweeted, “I’m told import duties are extremely high (up to 100%), even for electric cars. This would make our cars unaffordable.” Previously, he was enthusiastic about entering India. During his interaction with Indian students in July, he said Tesla cars might come to India by 2020. Business Insider reports Tesla was expected to enter India with its most affordable car, the Model 3, priced at about $35,000.

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India’s electric vehicle ownership remains low

India also lacks the infrastructure for EVs (electric vehicles), such as charging points and high-quality roads. Because of EVs’ high costs and lack of support, their ownership is low in India. According to The Financial Express, EVs comprise under 1% of total vehicle sales in India. The country is now opening up to the idea of EVs, with the government targeting 30% electric mobility by 2030. On July 27, the Indian government cut the goods and services tax for EV components from 12% to 5%. Also, it reduced the tax on EV chargers from 18% to 5%.

Issues with India’s policies, tax, and infrastructure

Tesla, however, doesn’t enter markets outside the US by building factories. Instead, the company imports vehicles and sells them in the market. This is the business model it has been following in China as well. This month, Musk tweeted, “we pay in part for the local factory by selling cars there ahead of time. Also, gives a sense of demand.” However, adopting this model in India may not work as its vehicles could be unaffordable.

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India’s push towards EVs

In its drive towards EVs, India is planning to build large factories to make lithium-ion batteries, which the company mostly imports currently. Having to import the batteries drives up the costs of EVs. The vehicles’ high ownership costs are a significant hurdle in boosting their adoption in India.

India to build Tesla-inspired factories

Indian newspaper Mint reports EV manufacturers have shown interest in India’s plan to develop these factories. Citing NITI Aayog estimates, Mint says India would need six facilities of ten gigawatt hours each by 2025 and 12 by 2030. The paper reports that, with these factories, India is trying to achieve what Tesla has done at its Gigafactory 1 in Nevada. India is reportedly promoting EVs to cut down on expensive crude oil imports and reduce pollution.

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Could Tesla come to India?

According to Mint, an Indian government official said, “All the top global manufacturers, including Tesla, have evinced interest. We will get more clarity once the tender documents are bought.” The expenditure finance committee is expected to award the final tender by February, Mint reports.

Tesla hasn’t confirmed or denied this news. However, if Tesla were to build factories in India, the country’s EV landscape could change dramatically.

Tesla’s launch in foreign markets

Recently, Tesla launched its Model 3 in South Korea and attracted significant interest from prospective customers. Also, in its Q4 2018 release, Tesla stated that “the market opportunity for Model 3 in Europe and China exceeds North America based on the most recent sales of mid-sized premium sedans.” Tesla, along with legacy automakers such as Ford and General Motors, is battling declining auto demand in the US as well as China.

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