Tesla's India Charge: Can Local Manufacturing Overcome Pricing, Charging Challenges?

Tesla has shown keen interest in tapping into the promising Indian market. This development followed a meeting between Elon Musk and Prime Minister Narendra Modi during the latter’s visit to the U.S.

Musk expressed the company’s intention to make significant investments in India but noted they are still figuring out the best timing. He also assured that Tesla would set foot in India “as soon as humanly possible”. After failing to secure a reduction in import taxes on luxury cars in India, Tesla must now consider manufacturing or assembling its cars locally.

Navigating an emerging EV market:

In the U.S., Tesla’s cheapest model is priced a little over $40,000 (₹32.81 lakh). However, India imposes up to 100% import duty on such vehicles, making them unaffordable for many consumers. To bypass these high tariffs, Tesla is considering local manufacturing or assembly.

Before Tesla can start production in India, it needs to develop a local supply chain, a process that might take one or two years, according to Hemal N Thakkar, a director at Crisil Market Intelligence and Analytics. According to a Bloomberg Quint report, industry experts believe that Tesla’s car pricing will be a challenge in the price-sensitive Indian market.

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If Tesla opts to assemble its cheapest product, the Model 3, locally in India, the cost might rise to around ₹50 lakh ($67,000) due to import duties. This price range offers limited competition from other electric vehicles but does pit Tesla against luxury gasoline-powered vehicles. Despite this, Tesla’s brand appeal might attract a significant number of buyers.

Setting up a charging network

One of Tesla’s main challenges will be the lack of a supercharger network in India, which provides the company with a competitive edge in other markets. Gaurav Vangaal, associate director at S&P Global Mobility, suggested that Tesla’s entry could positively impact India’s electric vehicle ecosystem by bringing new technologies and possibly establishing a charging infrastructure.

Initially, the absence of a charging network might not be a major concern, as most Indian electric car owners charge their vehicles at home or work.

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