Problems Tesla will face in India

Simran Shahid Simran Shahid
Jan 22, 2021 3 min read
Problems Tesla will face in India

Tesla, the electric vehicle manufacturer of Elon Musk, is set to start selling its base model in India in the near future. Tesla, the electric vehicle manufacturer of Elon Musk, is set to start selling its base model in India in the near future. While many of its fans in India were jubilant about Tesla's entry, capturing the market can be the most daunting challenge the company has had until now. The business has recently registered to open a Ben A Bloomberg article notes that Elon Musk is negotiating the opening of showrooms and possibly a factory with other Indian states Galuru branch. In India less than 1% of vehicles sold are electric vehicles, according to the Bloomberg report.

Elon Musk’s clean energy and electric vehicle company Tesla will start operations in India early next year, confirmed Union Minister for Road Transport and Highways Nitin Gadkari.

Tesla's entry into India

Tesla is initially expected to sell its vehicles in India, and it would also look at setting up a manufacturing facility at a later stage depending on demand, Gadkari told The Times of India.

Gadkari has already held a few rounds of talks with top Tesla executives. Some states have also held meetings with the electric car company for sales of its vehicles in India.

At a recent media event, Gadkari said there is focus on developing electric cars and added that a lot of Indian firms are also looking at developing electric cars.

Challenges faced by Tesla in India:

India announces steps to improve the country's Electronics sales but they may not be sufficient to increase the sales of Tesla's costly EVs. In2015, India launched the FAME, which includes a Rs 900 crore pledge to subsidies for electric tricycles for busses, as per the International Energy Agency, with a Faster Adoption and Development of Hybrid and EV (FAME). Another FAME program with Rs 10,000 Crore was launched in 2019 to enable people to buy electricity supplies and build charging infrastructure. In addition, by August2019, the government has reduced the GST on electricity vehicles to 5 percent.

The tax rates for cars in India are one of the highest in the world. The tax rates for cars in India are one of the highest in the world. This includes a 28% Goods and Services Tax (GST) and charges ranging from 3 to 22%. Though subsidies for electric cars exist in places like New Delhi, they are not sufficient for more people to afford Tesla's cars. High taxes deter demand, and thus the attractiveness of economies of scale to consumers is reduced for manufacturers. For international brands, that was disastrous and Tesla could face the same fate. Toyota announced last month that further growth in India will be stopped due to high taxes. Harley Davidson's decision to leave the market late last month was allegedly attributed to higher taxes. Last year, Ford announced its move to a joint enterprise for the most part of its assets.

Pricing Challenge and Customer Base:

In India, Tesla's greater challenge is pricing. Given that Tesla's costly bids would not be eligible for EV subsidies in this region, BnEF Analyst Allen Tom Abraham told Bloomberg that the top limit for EVs in India to eligible for subsidies is Rs 15 lakh. It is worth noting that Tesla Model3, built in China, is started at 2,65,740 yuan or almost $41,000. The cost of crossing Model Y from Shanghai begins with 339,900 yuan. In addition to the price the export prices and charges on the Tesla cars will not be met for the majority of customers when they arrive in India.

It is about half that of China's average prices and just 25% of US average vehicle prices. This suggests that Tesla's cheapest car in India will attract just around 1% of the market, says Abraham. Tesla would therefore have a marginal sales volume in India. While Tesla is facing challenges, India's demand for electricity is now at a rising stage and, according to a study conducted by CEEW for Energy Finance, its value could reach up to $206 billion in the next decadence.

If it is to succeed, Tesla must keep its commitment to India. This is not the first time that Tesla CEO promises to visit India, as most musk watchers know.


Tesla would open its Model 3 vehicle pre-bookings, and deliveries would take place before June. There is no chance of the business working with dealer companies in order to sell their vehicle. Potential buyers should note that while Model 3 is one of the more affordable cars in Tesla, it is not cheap to get to India, since it will be fully-built (CBU) cars with a high import duty. Although the prices are not confirmed, reports show that Tesla Model 3 costs Rs 55 lakh in India.

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