Elon Musk has yet again laid down the gauntlet in front of the Indian government and said that the launch of the electric car maker Tesla in India will only happen after it resolves its issues with the government. In a response to a tweet he said, "still working a lot of challenges with the government."
Musk's Tesla has been lobbying the government for a reduction in import duty while it hasn't given any kind of commitment or assurances towards local manufacturing of its electric cars. Musk has been outspoken on social media about the import tax laws in India, calling the import duty on cars in India, the highest anywhere in the world.
Tesla has manufacturing facilities in three places - its original Gigafactory in Nevada, one in Shanghai and its latest one has come up in Berlin. It is also building a new factory in Austin, Texas. However, it currently has no plans of building a facility in India, which is something the Indian government wants to push its make in India initiative.
In January 2021, Tesla established its Indian entity and through the year, both the Tesla Model 3 and Model Y was seen testing. Tesla's mule cars were said to fail road tests as well thanks to their low ground clearance which many experts believe would need a major redesign of the suspension of these vehicles.
Pooja Batra recently bought a Tesla Model 3
Photo Credit: www.instagram.com
The Model 3 which retails for $40,000 in the US would also be subject to 2x the costs thanks to import tariffs in the country. At upwards of Rs 60 lakhs, the entry-level Tesla would be unviable in India especially when up against premium luxury cars from German and Italian manufacturers. Tesla will also not have the advantage of its supercharger network in India.
For Tesla to enter India, it needs import concessions. Even at $40,000 the Tesla Model 3, is three to four times more than the average price of a sedan in India. It is a niche product further hobbled by the lack of infrastructure that will trigger range anxiety for many. At its price, it also is a very bare-bones vehicle and will not come with its differentiating AutoPilot technology which has caught the ire of regulators in even the US.
Since it is a niche brand, Tesla needs to create a case of volume for it to make any commitment towards local manufacturing. It also needs a more affordable car something which Musk had announced in September 2020 - a hatchback for emerging markets that will hit the sub $25,000 price point, but that car could be at least 2 years away.
undefinedStill working through a lot of challenges with the government
— Elon Musk (@elonmusk) January 12, 2022
Tesla executives in India have been lobbying for tax breaks on import duties, but the government hasn't budged. Apple faced a similar issue a couple of years ago and it saw its market share drop to record low levels in 2018. However, in 2019 older models started seeing local manufacturing, and today, its business despite the premium nature of its products is doing really well. Tesla may need to budge as the government going by its past record, hasn't moved the needle on local manufacturing.
Indian brands like Tata and Mahindra are also aggressively moving towards the development of EVs and now the entire ecosystem is gathering momentum. On top of this, Hyundai has made a commitment to bring its international models and localise them for India. The Volkswagen group has also rallied to bring EVs from its Audi and Porsche brands to India, so Tesla needs to move fast so that it can avoid being late to the party.
But for Musk and Tesla, India may not be a priority. Tesla is focused on expanding its manufacturing in the US, launch its CyberTruck, Roadster and, the Semi electric truck - so a low margin business in a country where the laws are not attractive for business may not be something it wants to rush into.
