While the company is only focussed on importing cars at the moment, it will need to start manufacturing in India soon to cut down its costs and get a bigger piece of the India market.
India’s ambition to go all electric by 2030 got an electrifying push when Tesla, after a long drawn out courtship, finally committed in January this year, registering a local company, where it is expected to import and sell the Model 3 sedan by as early as mid-2021, seeking to target rich customers in a niche market. Many have been cynical about India’s ambitious target but the country going all electric by 2030 means big business all around.
In fact, according to an independent study released by the CEEW Centre for Energy Finance (CEEW-CEF) India’s 2030 vision of e-mobility (ie 70 per cent of all commercial cars, 30 per cent of private cars, 40 per cent of buses, and 80 per cent of two-wheeler (2W) and three-wheeler (3W) sales to be electric by 2030) translates into 102 million EVs, bringing the sector to be worth nearly $206 billion in the coming decade.
It also opens the floodgates for investors. According to the report EV sales present an investment opportunity of $ 177 billion for OEMs in vehicle production, $ 2.9 billion for the deployment of charging infrastructure, $ 12.3 billion in battery manufacturing and $ 206 billion revenue opportunity from end-consumers.
How Tesla can posh up India’s EV sector
Currently the EV market in India is dominated by two-wheelers and three-wheelers, with electric cars only accounting for less than one per cent of India’s overall car sales. Credit rating agencies Crisil Research and ICRA expect the overall EV penetration in the passenger vehicle market to remain at only around five per cent by 2025. Deloitte has projected the luxury car market in India to grow at a CAGR of 13-15 per cent over the next 5-7 years, while the mass car market is expected to grow at around eight per cent.
“While our average GDP per capita is pretty low, it's always misleading when you (only) look at the average numbers. The number of people right at the top - in terms of the upper middle class and the high-net-worth individuals - is a sizable chunk of people. And that segment is really growing at a good pace.” Rajeev Singh, partner and automotive sector leader at Deloitte told the Hindu in a comment. Stating he believes that the shift towards EVs will happen at a fast pace, though the current share remains low.
Tesla’s entry into the Indian market could change that. “Tesla setting up its R&D unit in India shows that the company really believes in the Indian engineering and manufacturing talent pool. Moreover, this will significantly change the customer's attitude towards electric vehicles and new technology adoption.” Tarun Mehta, co-founder and CEO of Bengaluru-based electric scooter manufacturing start-up Ather Energy told ET.
There could also be an impact on the EV ecosystem if Musk sets up a charging infrastructure for Tesla cars, at least in the top cities which are expected to be Tesla’s primary markets in India. “With Tesla’s entry, this is the first time when electric mobility will outdo petrol mobility - it will be much faster, much better, and much more smart connected than a petrol or diesel car,” Sohinder Gill, director general of electric vehicle makers’ industry body, Society of Manufacturers of Electric Vehicles (SMEV) told Hindu Business line. “Tesla, as a brand, is already well-known in India, despite not having a single car on the road. And that speaks really volumes in terms of the brand recognition.’
Currently, Tesla is scouting for locations to open showrooms in three Indian cities and has hired an executive to lead its lobbying and business efforts ahead of its planned entry into the country, reports Reuters. With no immediate manufacturing plans announced, but high import duties and the cost of shipping over manufactured cars to India, means Teals can only tap into a niche affluent consumer base within India to justify the heavy price tag attached to their cars.
If the company wants to expand further and tap into the Indian market, it will need to start manufacturing in India soon to cut down its costs. India's road minister told Reuters last month that the government is ready to offer incentives to ensure the carmaker's production cost would be less than in China if it commits to local manufacturing.