Tesla’s Indian market entry should worry luxury, premium segment

The Road to India

If the tweet from Elon Musk is to be believed, the world’s largest electronic cars maker may set foot in India by the end of 2019. Tesla’s CEO Elon Musk tweeted about the company’s expansion plans after Tesla posted a profit of $311.5 million in the September quarter.

The innovative carmaker has been interested in Asia for quite sometime now. Until recently, Tesla has been betting big on China and has announced to setup a Gigafactory much alike the one in Fremont, in Shanghai.

With its plans gaining steam in China,  India and the Indian EV market is not that far. If Elon is successful in opening and rolling out his stylish EVs from China by 2020, the competition in China may force it to look at the neighbour with the world’s fourth largest auto market. Besides India has been on Elon’s radar. Space X CEO has expressed  an interest in the Indian market earlier, and said “Would love to be in India. Some challenging government regulations, unfortunately.”

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If Tesla does enter India, the FAME subsidies may kick in under the faster Adoption and Manufacture of Hybrid and Electric Vehicles. But there is a glitch in those plans too. The Chinese manufactured Tesla models will have to be imported as CBU or completely built units to the Indian Markets. All the Tesla’s models-S, X and Roadster cars are priced at a significant premium over the Model 3(it’s least priced electric car), which starts from US $ 35,000, or less than Rs. 25 lakhs in the United States. In India, expect to pay nearly double for the Model 3 thanks to the import duties levied on completely built unit (CBU) cars.  While this seemingly makes the cars unaffordable for the mass market in India, so called luxury and premium brands will feel the heat, as their customers consider a Tesla instead, if the brand remains a high aspiration model in India. Brands like Mercedes, BMW and Jaguar have already seen this in the US, with Tesla eating up their shares, one reason why these brands are on a fast track to deliver EV versions earlier than they had planned.   In India Tesla seemingly has a ready and waiting customer base too. Back  in April 2016  when the Model 3 bookings were opened globally, major Indian influencers, from Vijay Shekhar Sharma to Vishal Gondal and many others had rushed to book and   announce their actions to the world, providing Tesla an extra boost among the young and restless.

Tesla could be the Indian Market  another way too; the ‘partial’ presence can be in the form of battery manufacturing. Tesla is in partnership with Panasonic and forms the largest electric-car-battery manufacturer in the world claiming almost 60 per cent of the global production. While Tesla will set up car production facilities in Europe and China, the company plans to set up battery manufacturing plants in every continent to keep the costs in line.

In a market that is changing as fast as the EV market is, hopes remain high that the India plans do happen.