9621 Agnes Crossing, Lake Suzanneview, New Mexico Island 84604-9295.
Tesla’s much-anticipated entry into the Indian market is stirring up excitement, but a recent report from CLSA reveals a surprising detail that could make many potential buyers think
Tesla’s much-anticipated entry into the Indian market is stirring up excitement, but a recent report from CLSA reveals a surprising detail that could make many potential buyers think twice. Despite lower import duties on electric vehicles (EVs), the cost of Tesla’s most affordable model, the Model 3, could still end up being much higher than expected.
In its latest report, brokerage firm CLSA suggests that the Tesla Model 3, which is priced at around $35,000 in the US, could cost anywhere between INR 35 lakh to INR 40 lakh when it hits the Indian roads. This is despite the lower 15-20% import duties on foreign-made EVs that the Indian government recently introduced.
CLSA arrived at this price range by considering various costs involved in importing a car to India, such as road tax, insurance, and other additional charges. The Tesla Model 3 is expected to retail at INR 35 lakh to INR 40 lakh once all these factors are added, making it significantly pricier than the base price in the U.S.
Despite Tesla managing to reduce import duties through government policies, this price range still seems to be a barrier for most potential buyers. Here’s why:
The Indian government has been proactive in reducing import duties for electric vehicles, especially those with higher price tags. Under the new EV manufacturing policy announced last year, cars that are priced above $35,000 (CIF value) can benefit from 15-20% import duties instead of the usual 60-110% that was previously charged.
Currently, EVs with a CIF value above $40,000 are slapped with 110% import duty, including a cess for agriculture, while those below this threshold face a 60% duty. The new policy aims to encourage EV manufacturers to set up production units in India and make local investments, potentially lowering the final cost of cars.
To qualify for these lower import duties, manufacturers like Tesla must set up a manufacturing plant in India with a minimum investment of INR 4,150 crore. Additionally, to avail benefits under this scheme, companies must meet a minimum turnover of INR 2,500 crore by the second year of operations.
The report also highlights that while Tesla’s entry into India is eagerly awaited, the higher price range for the Model 3 may not create a major disruption in the local EV market. CLSA believes that if Tesla prices its Model 3 at 20-50% higher than the Mahindra XUV 9e, e-Creta, e-Vitara, and other similar EVs, the competition with domestic players may not be significant.
The key reasons behind this could be the strong local competition and the specific features that influence the Indian consumer’s car purchase decision. According to CLSA, factors such as spacious interiors, local brand loyalty, aesthetic appeal, and better resale value are likely to be more important to Indian buyers than the powertrain (electric or otherwise).
Although Tesla is known for its cutting-edge technology and long-range EVs, many consumers in India prioritize practicality and affordability when making a purchase. Local EV manufacturers like Mahindra, Tata, and MG Motors have been making huge strides in offering budget-friendly and feature-packed electric cars that appeal to the masses. If Tesla positions its Model 3 too high above these offerings, it may not make a huge impact in the entry-level EV segment.
Tesla’s plan to enter the Indian market has been in the works for years, and the company is already in talks with multiple states, including Gujarat, Maharashtra, and Tamil Nadu, to set up a manufacturing unit. Tesla’s Indian strategy could follow the global trend of local production to reduce costs and improve accessibility.
Once Tesla sets up a local manufacturing plant, it is expected to drastically reduce the import duties and bring the prices of its models down. However, for now, the company is likely to import its vehicles in the short term, which will keep prices on the higher side.
Despite this, Tesla’s long-term strategy for India will depend heavily on the success of its local manufacturing plant and whether it can meet the requirements set by the Indian government’s EV policy.
Tesla’s entry into India faces stiff competition from homegrown EV makers who have already established themselves in the market. Some of the top competitors Tesla will have to reckon with are:
These homegrown options offer great alternatives at lower price points and have built significant brand loyalty among Indian buyers. Even if Tesla brings in its cutting-edge technology and global reputation, the price-sensitive nature of the Indian market might make it a tough sell.
While lower import duties offer some relief, they still aren’t enough to make the Tesla Model 3 a game-changer in India at the price Tesla might want to sell it for. The competition from local manufacturers, the preference for affordability, and the requirement for a local manufacturing unit are all factors that will play a major role in Tesla’s India strategy.
Even if Tesla is able to lower its prices in the future with local production, the price of the Model 3 could still be high for most Indian consumers. It will be interesting to see how Tesla adjusts its strategy in the coming months, especially with the Indian government’s focus on boosting local EV manufacturing.
While Tesla’s entry into India is undeniably exciting, the higher price tag for the Model 3 could prove to be a challenge in a price-sensitive market like India. With local EV manufacturers offering more affordable options, Tesla will need to position itself carefully to gain a significant foothold.
In the end, Tesla’s success in India will depend on how well it can adapt to the unique needs and preferences of Indian buyers, balance local production and pricing, and compete with domestic EV makers who are already gaining popularity.
