- Elon Musk announced on Friday that Tesla would enter India in 2021.
- India is the fifth largest car market in the world.
- Several US brands have left the Indian market in recent years. This includes General Motors and Harley Davidson.
The long-awaited arrival of Tesla in India is now months away, if Elon Musk is to be believed. Musk announced on Twitter on Friday that the electric vehicle (EV) manufacturer would “surely enter the Indian market next year”.
The rewards will be sweet if Tesla succeeds in the world’s fifth largest auto market. But it’s not going to be smooth sailing, and Tesla has to prepare for a hard drive ahead.
Here’s what Tesla can expect in India.
1. India’s high taxes
India has one of the highest tax rates for cars global. Currently, taxes on vehicles can reach up to 50%. This includes the goods and services tax (GST) of 28% and duties that vary between 3% and 22%.
Though there are subsidies for electric vehicles in places like New DelhiThey’re not enough to make Tesla’s cars affordable to more people.
High taxes discourage demand, making it less likely for manufacturers to pass the benefits of economies of scale on to buyers. This was disastrous for foreign brands, and Tesla could suffer the same fate.
Last month, Toyota announced that further expansion in India would be halted due to high taxes. High taxes were supposed to be that Reason why Harley Davidson decided to quit the market at the end of last month.
Additionally General Motors left India three years ago. Ford announced last year that it was moving most of its assets into a joint venture with an Indian automaker.
2. Tough competition
The Indian market for vehicles with internal combustion engines is dominated by local automakers such as Maruti Suzuki. As of December 2018, Maruti a 54% market share.
Other dominant players are Mahindra & Mahindra and Tata Motors. The signs are already suggesting that this trend is repeating itself in the EV market.
So, Tata Motors ordered one in the first quarter of fiscal 2020-2021 EV market share of 62%. This was aided by the introduction of an electric SUV earlier this year.
3. High volume, low margin environment
India may be the fifth largest car market in the world, but automakers rely on moving large volumes with low margins.
Some of the best-selling electric vehicles in India cost less than three times a Model 3, Tesla’s cheapest car. The Tigor EV from Tata Motors, for example starts at Rs. 9.44 lakh (about USD 12,800) after subsidies.
Even with Tesla’s price target for Model 2 of $ 25,000, it will only attract a tiny percentage of Indian buyers. To be a major player in the Indian EV space, Tesla would have to introduce cheaper cars. It’s an uphill battle for Tesla right now.
Tesla must keep its promise to India if it is to be successful. As most Musk watchers know, this isn’t the first time the Tesla CEO has promised to venture into India.
Three years ago, Musk expressed hope that the EV maker would start selling cars in India from summer 2017. That should not be. Last year, Musk stated that 2020, if not 2019, would “definitely” be the year Tesla would be Start selling in India.
The new date is now 2021. Let’s hope it’s not the same old song
Disclaimer: This article reflects the author’s opinion and should not be viewed as investment or trading advice to CCN.com. Unless otherwise stated, the author has no position in any of the securities mentioned.