Tesla’s Entry into the Indian Market: Competition and Advantages for Elon Musk

Over the past few years, Tesla has expressed interest in entering the Indian market, hindered mainly by steep import duties. However, with the recent announcement of reduced import tariffs for Electric Vehicles (EVs) priced above $35,000, the possibility of Tesla finally entering the Indian market has increased. In order to qualify for the reduced import tariffs, the manufacturer must guarantee an investment of Rs 4,150 crore, set up a manufacturing plant within three years with 25% localisation, and subsequently achieve 50% localisation within five years.

There is speculation about Tesla’s plans for India and it is presumed that with the reduced import tariffs, Tesla will start importing its vehicles. Tesla currently has a portfolio of four products and it is expected that these will soon compete in the premium and luxury EV space in India. Players like Mercedes and BMW have already made some investments in the luxury EV space in India and it remains to be seen if they are eligible to avail the import duty benefits in the new scheme.

Tesla is also expected to enter the mass market segment with the announcement of Project Redwood, a small mass-market EV proposed to be launched in 2025, and expected to be priced at around $25,000 or around Rs 20 lakh. This will compete with domestic EV players like Tata, Mahindra, and Maruti Suzuki, who have plans to launch EVs at various price points. India aims to achieve 30% EV sales by 2030, and the EV market share continued to grow rapidly, reaching 2% in FY24 with a growth of 91% over FY23.

Tata Motors currently leads the EV segment with over 70% market share and popular products like the Nexon EV. Tesla’s entry into the Indian market could also position India as a manufacturing hub for other regions and give Tesla a cost advantage. The company is expected to face competition from Chinese manufacturers who offer EVs at more economical price points.

Tesla will be the fourth country to have a manufacturing facility, and it aims to diversify its location and gain access to the third-largest automobile market globally.