Tesla in India

dhruvtalksstech
Jan 4, 2023
5 min read

Updated: Jan 5, 2023

Ask any Indian about an electric vehicle and the first company that comes to their mind is Tesla. Tesla is an American car brand currently owned and operated by the eccentric billionaire Elon Musk. It has been in existence since 2003 and was founded by Martin Eberhard and Marc Tarpenning which is something that not many people know about. Elon Musk joined Tesla in February 2004 and has served as the CEO since 2008. He owns roughly 14% of the company but that number fluctuates as the world's richest man often takes important corporate decisions based on tweet responses for a few hundred thousand people. That represents $60 billion in Tesla alone. For the longest of times, the Chief Twit has been very vocal about his plans to sell Tesla cars in the world's third largest car market - India. But the journey so far has been as smooth as India's roads.

Tesla is a highly ambitious and over-achieving car manufacturer. It is the most valuable car company in the world with a market cap of over $450 billion dollars which is a lot more than that of legacy automakers such as Ford, GM, BMW and Daimler. Tesla sells its cars most notably in the US, UK, Germany, China, Taiwan, Hong Kong, Canada, and several other European and Oceania countries. A staggering 60% of the 1 million Teslas sold every year are sold in China alone. Tesla has a 7% market share in the EV market of the world's largest car market. Another 30% comes from the US and the rest from other countries. But Tesla has not been able to sell any car in India yet.

People have been speculating Tesla's entry into the Indian market ever since 2019 and it became quite serious in 2021 when Tesla registered operations in India and promised to start selling vehicles by the end of 2021. Surprise, Surprise, that did not end up happening and we are already well into 2023 with no clear signs of an imminent India launch. Tesla's India launch is kind of like the cyber-truck. People are really excited for it but it just seems to get delayed again and again by months and years. Promises were made by the SpaceX genius but he is not able to uphold any of them. The main point of contention has been regarding the set up of a manufacturing facility. Under PM Modi, India has been aggressively promoting "Make in India, Make for the World" and is offering huge tax breaks to set up manufacturing plants all across the country.

The Indian Government is insisting Tesla should set up a manufacturing unit here in India but Tesla does not want to do so yet because they fear that if they are not able to sell enough cars in India, billions poured into manufacturing may be wasted and it is understandable why Tesla does not want to take this huge gamble. You could argue "Dhruv, why can't Tesla just import cars from China or Germany?" Well, cars exported to India are subject to a 100% import duty levied by the Indian Government in order to protect domestic players. So, a Model 3 that costs $40,000 in the US will cost over $80,000 in India (67 lakhs) for which one could easily get a BMW 5 Series or Mercedes E-Class and both are a segment above the Tesla. The rocket engineer requested the Indian government to receive an exemption from this law but there was a harsh pushback from legacy India carmaker Tata which sells the most EVs in India. They argued that rules of trade should be held up equally for all and that Tesla should not be an exemption.

The Indian Government was also strictly against China-manufactured cars on Indian roads following the soaring tensions between the two most populous countries on the planet. Nitin Gadkari, the Union Minister of Road Transport and Highways, has sided with Tata and looks firm in his position. The argument is not purely nationalistic. I am skeptical that Tesla would be able to function well in India. The 2 things that makes Tesla so great - Tesla superfast charging network and autonomous driving tech - are simply not available or applicable in India. India's EV charging network is very underdeveloped. Yes, there have been huge strides by the Governments of Delhi and Maharashtra in the last 2 years but it still very much inaccessible for most of the Indians who buy cars. I am not sure Tesla would be able to set up charging networks easily in India as they have been able to do so in the US and California specifically.

It requires huge capital and commitment and if we know one thing about the manufacturing plant incident, it is that Tesla may be serious about India only in tweets and not in its actions. The 2nd problem arises due to India's infrastructure itself. Indians road are poorly developed and only 60% of them are metaled. Of these 60%, not all are all-weather roads and the conditions of the roads is also bad. There is a lack of lane markings, traffic lights, sign boards and satellite data - all of which are required for an autonomous driving system to function safely and smoothly. The roads in India are also unpredictable and there is oncoming traffic from all sides and even stray animals on the street. A Tesla Model S Plaid will never be able to do the 0-100 dash in 2.99 seconds on Indian roads.

Teslas are freakishly quick and the acceleration is out of this world. But one would not often get the chance to experience it on Indian roads. The Sentry mode would have to remain active all the time and the valet function is sure to get the car damaged on the streets of India. Also, Tesla may be popular among the Indian youth but it is not the youth who spends tens of thousands of dollars to buy a luxury car, it is people in the 40-65 age bracket. Rich people who buy expensive cars in India want cars as a status symbol in society to flaunt their wealth but a Tesla does not have the same prestige as a BMW or a Mercedes in India. Tesla would have a really hard time in India. But this is no reason to give up on the idea. I would love nothing more than to be proven wrong by the Flamethrower inventor and am honestly rooting for the success of Tesla in India.

Tesla also has to deal with a lot of quality-control issues and set up dealerships all across in India even if they wish to leave a slight mark in the Indian car market. There is certainly a lot of growth potential and Tesla should capitalize on it.