Tesla's India foray was a long time coming. Will it be significant for the Indian auto and EV sector?

Tesla's India foray was a long time coming. Will it be significant for the Indian auto and EV sector?

"As promised” was Tesla CEO, Elon Musk’s reply to a Tesla focused news account on 13th January 2021. Tesla’s foray into India has been a long time coming. Will it be the tipping point for India EV’s as everyone expects?

Tesla and India have been through a long period of courtship in the last few years, perhaps since 2014/15. However, in 2021, it looks like Tesla has finally popped the question! As on 8th January 2021, Tesla formally registered its company "Tesla Motors India and Energy Private Limited" with the Registrar of Companies (RoC) in Bangalore.

Three people have been registered as Directors for the Indian subsidiary of the US-based Electric Vehicle and Energy company. What the company does next is anyone's guess as the company has not made any formal announcement yet. Its RoC filing does include that the company will be involved in “promoting the sale of electric vehicles and energy products, including parts, components, equipment, and accessories”.

The excitement on the back of this initial development is palpable on all the major social media platforms in India.

A visitor views the Tesla Model 3 electric vehicle at the Canadian International Auto Show. After a long journey, Tesla finally launched in India this year.
A visitor views the Tesla Model 3 electric vehicle at the Canadian International Auto Show. After a long journey, Tesla finally launched in India this year.

Tesla’s Indian odyssey

The courtship started (at least in the public domain) back in 2014 when Jay Vijayan, the then Chief Information Officer for the company (now Founder and CEO of Tekion Corp.) said in an interview that India would be an attractive market for the $35,000 Tesla model 3.

As per the interview, Jay highlighted that the company would need to liaise with the Indian government to discuss subsidies, import duties and infrastructure availability.

In 2015, the Indian Prime Minister, Narendra Modi's visit to the company's factory in California filled consumers, business leaders and industry watchers with a lot of hope. The visit did prove fruitful with Musk tweeting in October 2015 that "Given high local demand, a Gigafactory in India would probably make sense in the long term".

The positive developments gathered momentum in 2016 when Tesla opened bookings for its Model 3 in India. Also, in June 2017 Elon Musk tweeted a World Economic Forum article highlighting the Indian Government's commitment to have only electric cars sold in the country by 2030.

Many EV/RE leaders from India including Chetan Maini, Anand Mahindra, among others reacted positively to this. While Chetan Maini, Founder Sun Mobility said "India needs 280GW of solar (0.5% of the state of Rajasthan) to power its target of an all electric fleet by 2030. Very feasible & affordable", Anand Mahindra's quip, "Time you got out here Elon. You don't want to leave that whole market to Mahindra do you?? The more the merrier--and greener..!" got a response in agreement from Elon Musk as well. It was a great moment where, through the power of social media, business leaders could engage in a dialogue that could potentially have a significant impact on the future of a large industry in India.

Initial teething problems

However, this positive journey soon veered off the highway of progress into a side street with potholes. While opening the Model 3 for bookings did generate strong interest from leaders in the tech community, deliveries for these orders have been pending (at least as of February 2020 according to a forum on the Tesla website) due to reasons like high import duties on automobiles, highlighted by Elon Musk in 2019.

Also, despite the reported overtures by the Indian government, like offering land near ports, targeted policies like the Phase 2 of the FAME (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles) scheme, Tesla went ahead to open a Gigafactory in China which began production in 2019.

What exactly kept Tesla away from India all these years is not extremely important at this point; it is time to look forward. Now that the company has taken its first step in the country, what can we expect from it in the next few months? How significantly will it impact India EV push? What do the state and central governments need to do to ensure Tesla has a good run in the country?

A new chapter

Tesla is a company in the global spotlight with watchers, investors, and fans across the world. How the company fares in India will be looked at very closely by potential investors from across sectors. Recent reports suggest that the company is exploring the possibility of setting up an R&D centre based in Bengaluru and an assembly plant at Dharwad in north Karnataka. Taking a cue from Tesla in China, Tesla will need to engage a network of suppliers to support its production and could also invest in a charging network to support its sales.

This will indeed create many more indirect jobs in addition to the direct workers associated with Tesla. Tesla’s large investments could be a significant shot in the arm for EV adoption in the country. Separately, the company’s “no-ads” sales strategy hinges on early adoption by industry leaders, celebrities, and influencers. When this snowballs into adoption by an increasingly wider section of the society, it will incentivise local and international carmakers to release EV models as well.

Tesla’s effect on India’s EV adoption could be profound. It could create a tipping point in the Indian EV auto sector, that Indian automakers, arguably potential competitors of Tesla, could also benefit from. I just hope that all stakeholders including Tesla, the Indian Government, and the local private players, work together to increase the size of the pie in the automotive sector, ensuring more jobs and a wider EV adoption going forward.

India Global Business