Elon Musk looks all set to enter the burgeoning Indian electric vehicle (EV) market in the New Year after several years of dilly-dallying, giving the masses a hope that owning a cheaper Tesla Model 3 may soon be possible with local manufacturing of battery components and a robust EV supply system.
Reports say that the world’s richest man is set to arrive in India during the ‘Vibrant Gujarat Global Summit’ on January 10-12 as Gujarat, with its strategic location and favourable business environment, has emerged as the "preferred destination for Tesla’s manufacturing plans".
The announcement by Musk to manufacture in India is likely to be made in the presence of Prime Minister Narendra Modi at the flagship event, although the government or Musk are yet to make this mega news official.
According to industry experts, Tesla prices are nearly the same across the globe and currently, the base variant of the Tesla Model 3, which is the cheapest model available, is priced at $40,240 (approximately Rs 33.5 lakh).
Importing this model into India will incur a cost ranging between Rs 60-66 lakh. India imposes a 100 per cent import tax on electric vehicles (EVs) priced above $40,000.
If all goes well, Tesla can reportedly produce 5 lakh electric vehicles annually that starts from Rs 20 lakh, as the electric car-maker plans to set up its auto parts and electronics chain in India, along with incentives and tax benefits.
While India’s official stance is that no subsidy will be provided on imports of EVs, reports recently surfaced that Tesla may be granted the ability to import fully-built cars at a concessional import duty of 15-20 per cent, a significant reduction from the current 100 per cent duty on such imports.
“This import duty can be eliminated by setting up local production, paving the way for a cheaper, affordable Tesla car,” senior analyst Soumen Mandal from Counterpoint Research told IANS.
This cost reduction could also be achieved if Tesla models manufactured in India have fewer features compared to the ones available in the US.
“For example, certain hardware required for Full Self-Driving (FSD) could be eliminated and, instead, Advanced Driver Assistance System (ADAS) Level 2 could be included,” Mandal added.
The battery pack, imported from China, could have a capacity lower than 50kW and the electric motors could be of lower power.
Additionally, the in-vehicle electronics could be reduced and a smaller centre display used, according to analysts.
According to reports, if the government has to consider giving incentives to Tesla, then it will be for all the EV makers and foreign entrants.
To resolve the deadlock, Tesla officials have had marathon meetings with the government officials and industry executives in India in recent months.
“The possibility of a Tesla in India at potentially around Rs 20 lakh depends on an array of variables, including potentially attractive policy incentives, and Tesla’s ability to accomplish efficiencies in supply chain and costs to effectively leverage local manufacturing. All said, pricing decisions will be driven by Tesla's business strategy,” according to Prabhu Ram who heads the Industry Intelligence Group (IIG) at CyberMedia Research (CMR).
The automotive market is highly competitive. While Tesla could get a competitive advantage with policy incentives, current automotive market incumbents would be spurred to invest further, and scale their EV portfolio, Ram added.
India's EV market has the potential to achieve over 40 per cent penetration with $100 billion revenue by 2030.
This growth is expected to be driven by strong adoption (over 45 per cent) in both two-wheeler (2W) and three-wheeler (3W) categories, with four-wheelers (cars) penetration projected to grow to more than 20 per cent, according to a recent report by Bain & Company and Blume Ventures.
“We expect that India will soon become a manufacturing hub for compact EV models, with prices starting from Rs 20 lakh,” Mandal said.