Model Why: Is Tesla ready for India? And is India ready for Tesla?

It was late March 2016. Tesla had just opened bookings for its cheapest car yet, the Model 3. As with most things Elon Musk, there was a twist to this much-awaited unveiling of a car that the founder believed would make electric vehicles (EVs) go mainstream — he made a big show of opening bookings in several countries where Tesla had no physical presence. India was one such.Quite a few Indians, especially tech entrepreneurs such as Vijay Shekhar Sharma of Paytm, venture capitalist Mahesh Murthy, Vishal Gondal of GOQii, and Sujayath Ali of Voonik, reportedly plonked down $1,000 for a chance to be among the first to own Musk’s dream wheels.Fast forward to March 2025.It has been nine years, but the car is still not officially available in India. Even folks who booked a Maruti 800 in the 1980s had to wait just three years for deliveries.Some of the bookings have been cancelled. But some still hold on to their reservations, hopeful that this time, their Tesla will come for real.The trouble is much has changed in these past few years.For one, unlike in 2016, there are some pretty good EVs available in India, some may well be better than the Model 3.Musk himself has become a highly polarising figure — from a darling of the eco-conscious to the divisive dude in a MAGA hat. That has dimmed the sheen of the brand and its sales, resulting in the Tesla stock halving in value in the past four months.So, here is the key question. Did Tesla wait far too long before driving into India? medium nocaptionhttps://vct.ikan3.com/3sw658_7hzteqpqoj/1kaMrVs1sdZ3Kx?2qxpm=1uf1epQ2J8lLnyK9m6kBoeyb plansTesla is certainly making tangible moves. It recently held a public hiring event in Mumbai to recruit for a variety of roles — from sales and service advisers to customer support specialists and delivery managers. It also secured showrooms in Mumbai and New Delhi and started homologating — i.e., complying with rules and standards for sales in a region — its Model Y and Model 3.India’s EV penetration is still low, with electric passenger vehicle sales accounting for less than 3% of total sales. However, sales have grown substantially, from 5,000 units in 2020 to more than 113,000 in 2024. It is this momentum Tesla could tap, especially in the premium segment, says Ravi Bhatia, president of automotive consultancy Jato Dynamics.However, Chetan Maini, India’s EV pioneer who made the Reva EV, says the ideal time for Tesla’s India entry might have been two or three years ago. He points out that Tesla’s tech edge counts for less now. “The differentiator on technology and performance has considerably narrowed. There are many equivalent products here,” he says.Transport minister Nitin Gadkari is optimistic that Indian car makers can take on Tesla. “Indian electric car makers are no less, and we have the best in terms of design, quality and technology,” he said recently.Unless there are issues with the quality or performance of current EVs, Tesla will find it difficult to find a competitive advantage.“Tesla’s entry will surely create a buzz and hype. It will create a ‘moment’, but not an ‘Apple moment’,” says Maini. medium119798684Beyond the hypeMaini is referring to the impact Apple has had on tech. Tesla’s potential entry into India has been hyped up as akin to Apple’s launch of the iPhone that revolutionised smartphones, in that it could similarly impact EV adoption.It may not exactly turn out that way. The “Apple moment” goes beyond the product, and is about an ecosystem. Unlike smartphones, electric cars need to be adapted to local conditions, including infrastructure.In theory, Tesla could drive growth in EV charging, energy storage and renewable energy. Tesla’s gigafactories could boost India’s manufacturing and tech sectors by producing EVs, batteries and charging solutions locally. But would they go all in?Tesla also has to be accepted first, and that comes with some challenges. Their direct sales model may need to be adjusted for India’s dealer-centric market. After-sales service, a critical factor, has to be robust.Then there is pricing — India is price-sensitive, with the bulk of the passenger vehicle market below ₹20 lakh.The cheapest Model 3 retails for $42,490 in the US (around ₹37 lakh), placing it firmly in the luxury segment in India, even before duties come into play. Initially, at least, these cars will likely be imported from Germany, adding a similar amount to the sticker price in duties, unless US President Donald Trump arm-twists India into cutting tariffs.That limits their market.Rajeev Chaba, CEO emeritus of JSW MG Motor India, the India unit of Morris Garages, believes price point will be a challenge for Tesla.In January, Musk hinted at launching more affordable models in the first half of 2025. A $24,000 car, colloquially called Model 2, has been speculated for years, but that may not happen if news trickling out of China is to be believed, where Tesla is trying to reignite demand with a cheaper, stripped-down version of Model Y instead of a whole new car.If Tesla wants to have more than a token presence in India, it would need to have better pricing, and value-driven offerings, than even China.“I think India is ready for more players, especially as EV penetration continues to grow. Tesla’s entry might not be as disruptive as anticipated, but it would help create a better EV ecosystem,” says Chaba. medium119797619Manufacturing optionsThe buzz is that Tesla is initially looking at contract manufacturing by tapping into the 25% headroom in India. The country has a production capacity of 6.2mn units, but the capacity utilisation is only 75%. In such a scenario, Tesla will have to sacrifice control over supply chain, likely affecting production timelines and costs, which is why their entry into new geographies tends to be through its own gigafactories.It has five such — three in the US and one each in Germany and China — with another being built in Mexico.The good news is that setting up gigafactories in India would be cheaper than in the West.The cost of Tesla’s proposed India facility, targeting 500,000 units annually, is estimated at $2-3bn, far below the gigafactories in Berlin and Texas that cost $5bn and $7bn, respectively. India’s cheaper land and labour costs help — $2-5/hour as against $25-36/hour in the US and $35-45/hour in Germany.A critical conversation would also be to examine how Tesla operates when it comes to locating its gigafactories. That tends to spark a race among states, each one lured into offering incentives, including tax breaks and cheaper land. Already there is talk of Tamil Nadu, Karnataka, Maharashtra, Gujarat and Telangana wooing Tesla.Incentives can offset the costs of setting up a manufacturing base, but they have been controversial in the West. In the US, Tesla scored more than $2bn+ in tax breaks and Germany offered $430-540mn in subsidies.India’s 2024 EV policy provisions for duty cuts, which Tesla reckons aren’t attractive enough, ergo the chatter around contract manufacturing. medium nocaptionhttps://vct.ikan3.com/3sw658_7hzteqpqoj/5prZELctixaxR8?si=EsXR8d6j_ZOSMLhpThe charging problemA key issue when it comes to buying EVs in India remains charging anxiety.Mohit Yadav, co-founder of Bolt.Earth, which runs a network of chargers, says charging shouldn’t be seen as a major hurdle anymore, since most EVs give incredible range.There is also a growing public charging network. Tesla has its own superchargers that it would likely launch in India, but that would require investment and time. Until then, they can rely on public charging.The number of charging points has been doubling every six months, and as of December 2024, there were 10,500 public charging stations with 14,500 charging points, not including captive and residential chargers. By June, this will go up to 20,000 and 30,000, respectively.Type 2 or CCS2 connectors, used in most of these stations, are adaptable to Tesla’s charging standards, says Priyans Murarka, whose Substack newsletter ExpWithEVs.in provides data on the EV charging infrastructure in India.Charging stations tend to be concentrated in bigger cities, something that private players such as ChargeZone, according to founder Kartikey Hariyani, are tackling.Tesla needs IndiaAs much as India stands to gain from Tesla, the converse is true too. Its sales have been declining in key markets due to increased competition from rivals like BYD, as well as delays in new model updates. BYD has now overtaken Tesla to become the world’s largest EV manufacturer by both revenue and units sold.This, along with Musk’s political parlay, has impacted its market cap, which has shrunk by nearly $800bn.As Tesla struggles to regain momentum in its core markets, it would need more than a ripple in India to inject enthusiasm.Tesla could very well be late already to the party in India, and if it wants the country to love it back, it would probably need to go all in — gigafactories, battery manufacturing, new models, cheaper pricing, better value, et al.Making an announcement and making buyers wait nine years won’t work anymore.