Tesla is once again in the spotlight as it inches closer to entering the Indian market, after two previously unsuccessful attempts.
The latest reports suggest that the EV giant has begun producing vehicles at its Berlin facility for import into India, while also actively scouting potential factory locations.
These developments follow Tesla CEO Elon Musk’s recent meeting with Indian Prime Minister Narendra Modi.
However, neither Musk nor the company has officially confirmed these plans.
According to a report by CNBC-TV18, Tesla intends to start selling imported vehicles from its Berlin plant in India as early as April.
The company is expected to introduce a budget-friendly EV priced at approximately $25,000 (around Rs 21 lakh).
Adding weight to these claims, a Reuters report suggests that Tesla is finalizing locations for two showrooms in India and has posted 13 job openings across sales and service roles in Mumbai and Delhi.
Reduced EV import duty could make Tesla cars more affordable for Indians
Tesla’s past attempts to enter India were hindered by the country’s high import duties, which range between 70% and 100% on completely built units (CBUs).
These steep tariffs would make Tesla’s vehicles prohibitively expensive for most Indian consumers.
However, India’s new EV policy, announced in March 2024, has the potential to ease Tesla’s entry.
The policy allows automakers that invest at least $500 million in local manufacturing to import 8,000 EVs annually at a reduced 15% import duty.
If Tesla qualifies under this policy, its vehicles could become significantly more affordable for Indian buyers.
India’s EV market: opportunities and challenges for Tesla
India’s electric vehicle market is set for rapid expansion.
According to Frost & Sullivan, the sector is expected to grow at a compound annual growth rate (CAGR) of 34.5% between 2023 and 2030.
A report by the India Energy Storage Alliance states that India’s cumulative EV sales surpassed 4.1 million units in FY 2023-24, with projections exceeding 28 million EVs by 2030.
Despite this promising growth, Tesla faces a tough competitive landscape.
Domestic automakers such as Tata Motors and Mahindra have already established themselves in the EV sector by offering cost-effective models that align with local consumer preferences.
Furthermore, Tesla’s direct-sales model and limited service network could pose challenges unless the company introduces a clear roadmap for aftersales service and charging infrastructure.
Will Tesla eat into the market share of Tata Motors, M&M?
Industry experts and analysts remain divided on whether Tesla’s entry will significantly disrupt India’s automotive market.
Some believe the company’s presence will drive competition, forcing domestic players to refine their pricing strategies and enhance innovation.
Others argue that Tesla’s impact will be minimal without a strong local manufacturing base.
Sathyanarayana Kabirdas, Vice President at Frost & Sullivan, believes Tesla’s ability to leverage reduced import duties could push other luxury automakers to reconsider their pricing models.
He also suggests that Tesla’s arrival may prompt the Indian government to introduce further policy adjustments to support local manufacturers.
On the other hand, India’s G20 Sherpa and former Niti Aayog CEO Amitabh Kant recently downplayed Tesla’s potential dominance in India.
“Tatas and Mahindras will not allow Tesla to succeed. Their prices are very competitive,” he stated.
Source: Finshots
Market analyst Ambareesh Baliga echoed this sentiment, suggesting that Tesla’s entry would have more of a sentimental impact on listed EV players rather than a structural shift in the industry.
“Tesla’s price range will be higher than that of the target customers of Tata Motors India EV, MSIL, and M&M, and hence, I don’t see any shift here. M&M may see a first-mover advantage in the mid-segment EVs, with the BE 6e and XEV 9e (priced between ₹20 lakh and ₹35 lakh) seeing record bookings,” he added.
Overall, I see Tesla’s entry expanding the EV market in India, but it may not eat into the market segment of existing listed EV players.
CLSA said that Tesla must establish local manufacturing to achieve price competitiveness, as even a reduced import duty may not be sufficient to bring prices below Rs 35-40 lakh.
Sanjeev Hota, head of research at Mirae Asset Sharekhan concurred, adding that Tesla’s entry into India has been discussed for years and is largely factored into stock prices.
Key EV component makers may benefit
Leading brokerages CLSA and Nomura believe Tesla’s entry will not significantly impact domestic market leaders like Maruti Suzuki or Tata Motors.
However, they see potential benefits for key suppliers such as Sona Comstar, Sansera Engineering, and Motherson Sumi.
Shares of seven listed Indian companies supplying parts to Tesla surged last week, as the EV giant’s India plans became clearer.
Sandhar Technologies rose 5%, SKF India gained 2.5%, Sundaram Fasteners climbed 2.2%, Varroc Engineering added 2%, Suprajit Engineering and Sona BLW were up 1% each, while Bharat Forge dipped 0.17%.
Here’s how four key suppliers are performing in the stock market:
Suprajit Engineering: The company has been supplying components to Tesla since 2022.
However, its share price has fallen 18% year-to-date, trading at Rs 390.
Sona BLW Precision Forgings: Known for its precision-forged components, Sona BLW could emerge as a major supplier to Tesla.
Its stock is down 15% YTD, currently at Rs 503.25.
Sundram Fasteners: This firm has been supplying Tesla since 2017 and secured a $250 million EV component contract in 2023.
Its share price has declined over 8.5% YTD.
Varroc Engineering: A supplier of lighting systems for Tesla’s Model S and Model X, Varroc’s stock has fallen 12.6% in the past year.
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