Tesla, led by Elon Musk, is preparing to enter the Indian market despite reduced import duties that still make its Model 3 start at around Rs 35-40 lakh. A CLSA report notes that even with a 15-20% duty reduction, the overall cost, including taxes, will keep prices high, potentially limiting disruption in the Indian EV market, where domestic models are cheaper. Tesla’s success hinges on establishing a local manufacturing facility, which could qualify it for further duty reductions. The company’s position reflects the price sensitivity of Indian consumers, posing challenges for competitive market entry without significant investment.
With Tesla, led by Elon Musk, preparing to enter the Indian market, a report by CLSA, a global capital market company, indicates that even after the reduction of import duty to below 20 percent, the lowest-priced Tesla car will still retail for approximately Rs 35 to 40 lakh.
The report notes that currently, Tesla’s most affordable Model 3 in the US has a factory price of around USD 35,000 (about Rs 30.4 lakh). Even with a projected decline in import duties to 15-20 percent in India, plus additional expenses such as road tax and insurance, the on-road price is expected to be around USD 40,000, or roughly Rs 35-40 lakh.
The report states, “The cheapest Model 3 for Tesla in the US is c.USD35k. With tariff lowered to c.15-20 percent in India, including road tax, insurance, and other expenses, the on-road price would be c.USD40k, which is close to Rs 3.5-4m.”
If Tesla prices the Model 3 at 20-50 percent above domestic electric vehicle (EV) models like the Mahindra XEV 9e, Hyundai e-Creta, and Maruti Suzuki e-Vitara, the report suggests that it is unlikely to significantly disrupt the Indian EV market.
Moreover, even if Tesla were to introduce a base model priced below Rs 25 lakh on-road and capture some market share, the report indicates that the recent drop in Mahindra & Mahindra’s stock is likely already reflecting this possibility.
Nonetheless, the report argues that Tesla’s entrance will not drastically affect major Indian automakers since the overall EV penetration in India remains lower than in China, Europe, and the US.
In the coming months, Tesla is set to launch its models in Delhi and Mumbai. The electric vehicle (EV) giant has also commenced its hiring process in India, taking a significant step towards its long-awaited entry into the local market. On February 18, Tesla listed a job opening for a Consumer Engagement Manager in the Mumbai Metropolitan Region on LinkedIn.
The report further elaborates that Tesla would need to establish a manufacturing facility in India to make its vehicles more affordable and expand its operations, even with import duties lowered to below 20 percent.
Under India’s electric vehicle (EV) policy, Tesla could benefit from a reduced import duty of 15 percent on up to 8,000 units annually if it invests more than Rs 4,150 crore in building a local facility.
In comparison, the report mentions the Indian motorcycle market, highlighting that Harley-Davidson’s X440, which is priced 20 percent higher than the Royal Enfield Classic 350, sells only around 1,500 units each month, while the Classic 350 enjoys sales of approximately 28,000 units monthly.
This indicates that Indian consumers are quite price-sensitive, presenting challenges for Tesla to gain traction without competitive pricing.
Ultimately, Tesla’s success in the Indian market hinges on its willingness to invest significantly in local manufacturing. Without this commitment, even with reduced import duties, Tesla’s vehicles may remain financially out of reach for a substantial segment of Indian buyers.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)