Overview Of The EV Market in India With Tesla Knocking on The Door

An overview of the electric vehicle market in India, as the government is driving a shift towards EVs with ambitious targets, incentives, and key initiatives and schemes. With Tesla's anticipated entry signals global interest, but challenges such as high import duties and charging infrastructure limitations persist. The competition in the EV space involves local players. While Tesla's potential success in India remains uncertain, its entry could significantly impact the market and can help the automotive industry .

Overview of India's EV Market

The Indian electric vehicle (EV) market is rapidly emerging as one of the world's fastest-growing, currently standing as the third-largest automobile market globally. With a robust push toward greener alternatives, a growing charging infrastructure, advancements in battery technology, and a rising consumer demand, electric vehicles are increasingly becoming a popular choice for Indian drivers.

The Indian government aims to achieve a 30% electrification of the vehicle by 2030, backed by a series of incentives and policies supporting the growth of the EV industry. This move not only aligns with global sustainability trends but also positions India as a key player in the worldwide transition to cleaner transportation.

Tesla's anticipated entry into the EV market in India, next year, reflects India's rising importance in the global automotive landscape. The company, renowned for high-quality electric vehicles, can boost the local EV ecosystem. Additionally, India can serve as an export base for Tesla, shipping cars to the Indo-Pacific region.

Government Initiatives

In line with India's EV Vision 2030, the government is passionately pushing the country towards a future dominated by electric vehicles (EVs). The goal is to achieve a 30% penetration of EV market size in India, in the automotive market by 2030.

To strengthen the EV sector, the government has implemented several crucial measures. Most notably, the goods and services tax (GST) for electric vehicles has been significantly slashed from the previous 29-50% range applied to internal combustion engine (ICE) vehicles to a flat 5%.

Government has introduced key initiatives such as the Faster Adoption and Manufacturing of Hybrid and Electric (FAME) Vehicle Scheme and the Production-Linked Incentive (PLI) Scheme for automobile and auto component has successfully attracted proposed investments totaling ₹74,850 crore, surpassing the target estimate of ₹42,500 crore over a five-year period. These initiatives act as catalysts for the proliferation of electric vehicles, incentivizing both manufacturers and consumers to participate in the electric revolution.

Simultaneously, the government has focused on expanding the charging infrastructure, a critical component for the widespread adoption of electric vehicles. Investments from both the government and private companies have led to a remarkable five-fold increase in the number of charging stations in just two years. The figures tell a compelling story – 6,586 operational public EV charging stations are now available across India, with an additional 419 operational stations located along national highways. This rapid expansion reflects the concerted effort to build a strong charging infrastructure network, addressing a key concern for potential EV adopters.

Tesla's anticipated entry into the Indian EV market.

Global firms are increasingly eyeing India, which emerged as the third-largest car market last year. Tesla, led by CEO Elon Musk, signaled its interest in the Indian market in June, expressing the company's intent to invest in India promptly after discussions with Prime Minister Narendra Modi. As per news reports an agreement is near, permitting Tesla to ship electric cars to India and establish a factory within two years. The potential announcement is anticipated at the Vibrant Gujarat Global Summit in January. Tesla plans an initial investment of $2 billion, with a commitment to sourcing auto parts worth up to $15 billion from India, with also the aim to produce batteries locally to reduce costs.

Despite Tesla's plans for India, its EV market lags at 1.3% of total passenger EV sales due to the high upfront costs of cars and growing but slowing concerns about charging infrastructure.

Tesla, deterred by high tariffs, refrains from direct car imports to India. The prospect of locally manufactured Teslas selling at $20,000 is on the horizon. The initial Tesla model introduced in India might be the Model Y. Seeking relief, Tesla has appealed to New Delhi for an initial tariff concession, aiming to counter the hefty 70% customs duty for sub-$40,000 cars and 100% for higher-priced ones. The government is anticipated to secure guarantees for a supplier ecosystem, starting with 20% local parts in the first two years and scaling up to 40% by the fourth year. A new policy may enable international car manufacturers, like Tesla, to import battery-powered vehicles at a minimal 15% duty, contingent on their commitment to eventual in-country production.

Tesla is expected to bring increased competition, improved technology, and positive changes to the Indian EV market, yet challenges persist, including high import duties and the need for an expanded charging infrastructure. However, these challenges also bring opportunities for the EV market growth in India, as well as for innovation and collaboration.

Competition in the EV Space

Lowering import duties will be a necessary factor to Tesla’s chances of success in the cost-conscious market, but the measure would likely face resistance from local manufacturers who think such a move would be unfair to those who have already invested in building supply chains in the country. Automakers like Maruti Suzuki, Hyundai, Kia, Tata Motors, and Mahindra & Mahindra (M&M) have already introduced a range of electric vehicles.

“We’ve seen tremendous competition in India over the last 20 years. So Tesla or anyone else coming in does not faze us,” Anish Shah, MD & CEO of the Mahindra Group.”

Tata Motors, holding a 71% share in the passenger EV market, has voiced concerns over Tesla's tax demands, conflicting with the government's FAME program and 'Make in India' priority. The Tata Nexon EV is expected to be a direct competitor to Tesla's most affordable model in India. Given that Tesla is the most profitable electric vehicle company globally, It's likely that both companies would aim to avoid direct competition.

As the focus shifts to Tesla's potential disruption in India's auto market, global players like Volvo and VinFast are expected to join the competition. Noteworthy is Tesla-rival VinFast's plans to invest significantly in an Indian EV plant. Meanwhile, Tesla seems positioned to benefit from political tensions between India and China, impacting the prospects of Chinese market participants. Despite Chinese EV firms like Great Wall Motors and BYD offering suitable options for the Indian market, Tesla appears set to capitalize on geopolitical circumstances.

Will Tesla be able to make it big in india?

In conclusion, Tesla's entry will push electric vehicle market growth in India and can help transform the country's automotive industry, akin to its impact in the U.S. With a track record of developing crucial infrastructure such as charging stations and pioneering features like self-driving capabilities, Tesla has gained a market king status in the U.S.

In India, despite challenges such as high costs and a limited charging infrastructure impeding widespread EV adoption, the market exhibits promise. Anticipated record-breaking pre-bookings for Tesla reflect high expectations. While acknowledging initial sales volume challenges, establishing local manufacturing could pave the way for broader regional influence.

The expansion of the electric vehicle market in India may diminish Tesla's appeal, mirroring the decline in Tesla sales observed in the United States. However, it underscores the imperative for other Indian EV car manufacturers to enhance their efforts and competitiveness.

In the mid to long term, government subsidies and incentives to Tesla will boost the EV market in India while benefiting the consumers. However, it poses a potential catch-22 situation for the Indian market, same as the case of Jio, where Airtel, Vodafone, and Idea faced market downfall. Similarly, a decade from now, Tesla might establish a monopoly in the Indian EV market, adversely affecting local players.

Such a scenario would not align with the government's sustainability and 'Make in India' initiatives. Let's see what plans the government has up its sleeves.