Tesla interested in entering Indian market

New Delhi: Elon Musk is expected to visit India next week to meet Prime Minister Narendra Modi and announce an investment of $2 to 3 billion to set up a Tesla manufacturing unit in the country.
For the last few years, Tesla has been interested in entering the Indian market, but due to heavy import duty, Tesla could not be brought to India. However, the recent announcement of lower import duty for electric vehicles (EVs) priced above $35,000 has opened the way for Tesla’s entry into India. However, there is a condition that the manufacturer will have to guarantee an investment of Rs 4150 crore and set up a manufacturing plant within three years with 25% localization. Later, the target of 50% localization will have to be achieved within five years.

Speculation continues regarding Tesla’s plans in India. For starters, $35,000 means Tesla can start importing all its vehicles into India. Its cheapest product in the American market is Model 3, whose starting price is more than $40,000. Tesla currently has a portfolio of four products.

It can be expected that Tesla models in the field of premium and luxury EV will come to India soon. Tesla products are expected to benefit given the current luxury and premium EV vehicle prices. Companies like Mercedes and BMW have already made some investments in the field of luxury vehicles. However, it remains to be seen whether they are eligible to avail import duty benefits in the new scheme.

Prices for the Mercedes EV range in India start at around Rs 80 lakh, while BMW’s cheapest EV, the iX1, is priced at around Rs 67 lakh. Price-wise, Tesla’s vehicles can also compete with products like Hyundai IONIQ 5, which is priced at around Rs 46 lakh. Apart from this, EV 6 is sold for around Rs 61 lakh.

Tesla is likely to import its products from Germany to India. Manufacturing of the right-hand drive version of its Model Y has already started at the Berlin Gigafactory.

Real success for Tesla will come from entering the market on a large scale. Tesla has announced Project Redwood, a small mass-market EV that is proposed to launch in 2025. Its price can be 25,000 dollars or around 20 lakh rupees. It will directly enter the field of domestic EV manufacturers like Tata, Mahindra and Maruti Suzuki. All of them plan to launch EVs in various price segments including the Rs 20-25 lakh segment.
The market share of EV remained at single digit (2%) in the financial year 2024. However, in the financial year 2013 it saw a sharp increase of 91 percent. India aims to achieve 30 percent EV sales in the vehicle market by 2030.

The leader in the EV segment in the country is Tata Motors with more than 70 percent market share. One of Tata’s most popular products is the Nexon EV, which is priced between Rs 14.5 lakh and Rs 19.9 lakh. The price of Maruti’s much awaited model EVX in the EV segment is also expected to be around Rs 20 lakh to 22 lakh.
It is a good sign for Tesla to reach the Indian market as it could be a market for its low-cost compact hatch Redwood. India has exported more than 6 lakh cars in the ongoing financial year.

Although there have been reports in the media that Tesla is moving away from small EV projects, but the company has not confirmed these reports. Elon Musk used X to refute the news of the media outlet reporting it.

Tesla has plants in America, Germany and China. India will be the fourth country to have a manufacturing facility for Tesla. Elon Musk is coming to India at a time when big global markets like America have seen a slowdown in EV sales. Due to this, Tesla has also had to reduce its production by 10 percent.
Tesla is also facing tough competition from Chinese companies, which are offering EVs at very affordable prices through their low-cost manufacturing.