Tesla has once again been in the limelight as it moves closer to the Indian market after its two previous unsuccessful attempts.
According to the latest reports, the EV manufacturer has started producing cars at its Berlin factory for export into India. It is also actively scouting possible factories locations.
Tesla CEO Elon Musk recently met with Indian Prime Minster Narendra Modi.
Musk and the company have not officially announced these plans.
CNBC-TV18 reported that Tesla plans to begin selling vehicles imported from Berlin to India in April.
It is anticipated that the company will introduce an affordable EV, priced around $25,000 (roughly Rs 21 lakh).
A Reuters article adds weight to this claim, stating that Tesla has finalized the locations of two showrooms for India. They have also posted thirteen job openings at various sales and service positions in Mumbai and Delhi.
Tesla’s cars could become more affordable to Indians with a reduced import duty
Tesla’s previous attempts to enter India have been hindered due to the high import duty, which can range from 70% upto 100% for completely-built units (CBUs).
Tesla vehicles would be prohibitively costly for Indian customers with these steep tariffs.
India’s new EV policies, which will be announced in March of 2024, could ease Tesla’s entrance.
Automakers who invest $500 million or more in local production can import 8,000 EVs per year at a 15% duty.
Tesla’s vehicles may become more affordable to Indian customers if they qualify for this policy.
India’s electric vehicle market: Opportunities and challenges for Tesla
India’s market for electric vehicles is expected to grow rapidly.
Frost & Sullivan predicts that the industry will grow by 34.5% CAGR between 2023-2030.
According to a report from the India Energy Storage Alliance, India sold 4.1 million electric vehicles in FY 2023-24. The projections are that this number will exceed 28 million by 2030.
Tesla is facing a challenging competitive environment despite its promising growth.
Tata Motors, Mahindra and other domestic automakers have established themselves as leaders in the EV market by providing cost-effective products that are aligned with consumer preferences.
Tesla’s limited after-sales network and direct sales model could also pose problems unless it provides a roadmap of its plans for charging infrastructure and service.
What will Tesla do to the market shares of Tata Motors and M&M when it comes to Tesla?
Analysts and industry experts are divided over whether Tesla’s arrival in India will have a significant impact on the automotive market.
Some people believe that the presence of this company will increase competition and force domestic companies to improve their pricing strategy, as well as innovate.
Some people argue that Tesla will have a minimal impact without a local manufacturing base.
Sathyanarayana Kabibirdas is a Vice President with Frost & Sullivan and believes that Tesla’s ability leveraged reduced import duties may push other luxury carmakers to reconsider pricing models.
He suggests the arrival of Tesla in India may also prompt further policy changes to be made by the Indian government, to help local manufacturers.
Amitabh Kant, former CEO of Niti-Aayog and India’s G20 sherpa recently downplayed Tesla’s dominance potential in India.
Tatas and Mahindras won’t let Tesla succeed. “Their prices are extremely competitive,” said he.
Source Finshots
Ambareesh Baliga, a market analyst, echoed the sentiment and suggested that Tesla’s entrance would likely have a more sentimental effect on listed electric vehicle players than it would be a structural change in the industry.
Tesla’s pricing will be more expensive than the price of Tata Motors India’s EVs, MSIL and M&M’s target customers, so I do not see a shift in this area. M&M could have a competitive advantage with mid-segment electric vehicles, such as the BE6e and XEV9e. These models are priced between Rs20L and Rs35L.
In general, I think that Tesla’s entry will expand the EV sector in India. However, it is unlikely to eat away at the existing market share of listed EV companies.
CLSA stated that Tesla should establish local production to be competitive in price. Even a lower import duty might not suffice to reduce prices to below Rs 35-40 lakh.
Sanjeev Hota is the head of research for Mirae Asset Sharekhan. He agreed, saying that Tesla’s entrance into India had been talked about and accounted for in stock prices since years.
Key EV component makers may benefit
Nomura and CLSA, two leading brokerages, believe that Tesla’s arrival will have little impact on domestic leaders such as Maruti Suzuki and Tata Motors.
They see benefits to key suppliers like Sona Comstar Sansera Engineering and Motherson Sumi.
The shares of seven Indian listed companies that supply parts to Tesla increased last week as Tesla’s India plan became more clear.
Varroc Engineering grew 2%. Suprajit Engineering, Sona BLW, and Suprajit Engineering each gained 1%. Bharat Forge fell 0.17%.
How four major suppliers have performed on the stock exchange:
Suprajit Engineering has supplied components to Tesla’s vehicles since 2022.
The share price of the company has dropped 18% in the last year, and is currently trading at Rs. 390.
Sona BLW Precision Forgings : Known as a supplier of precision-forged parts, Sona BLW may become a significant player in the Tesla supply chain.
The stock has fallen 15% in the last year, and is currently trading at Rs. 503.25.
Sundram fasteners has supplied Tesla components since 2017. The firm also secured a contract for $250 million in EV parts by 2023.
The share price of the company has fallen by over 8.5% in the last year.
Varroc Engineering: Varroc Engineering, a supplier of lighting for Tesla Model S and Model X has seen its stock fall 12.6% over the last year.
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