Tesla Inc.
’s
TSLA
long-desired entry in India is not far away. Recently, Nitin Gadkari, the country’s Union Minister for Road Transport and Highways, confirmed that Tesla is set to make its debut in India in early 2021 with the launch of its electric vehicles (EVs) in the country.
The U.S.-based EV titan always expressed its interest in expanding into the India auto market. Infact, in 2016, Tesla started taking pre-orders for Model 3, its flagship vehicle, in various global markets, including India. Fans of Tesla in India paid the token amount of $1,000 to pre-order Model 3.
However, entering the India auto sector posed to be a massive challenge for the auto giant. In 2018, Tesla’s CEO Elon Musk blamed local regulations,which required automakers to source 30% of the parts domestically,owing to which the automaker failed to make its debut in the nation.
Nonetheless, in October, Musk confirmed plans of bringing the EV frenzy to India by entering the country in 2021. Tesla will initially set up its sales network in the country from next year, and based on the demand, the EV pioneer may set up a domestic assembly and manufacturing facility soon.
Reportedly, the more affordable Model 3 sedan will be the first EV to enter the India market through the completely built unit (“CBU”) route, booking for which is likely to commence in a few weeks.
Riding the EV Wave in India
Amid the heightening climate change concerns, it has become imperative for countries to resort to green means of transportation. However, the EV market in India is still at a nascent stage, with EV adoption less than 1%.
Nonetheless, the Indian government has targeted to reduce carbon emissions by 30-35% by 2030 as well as cut down on crude oil imports in the nation in a bid to bring a green revolution. India plans on achieving this goal by the electrification of two-wheelers, three-wheelers and commercial vehicles.
The government intends to kick start an era of EVs by electrifying 30% of private cars, 70% of commercial cars, 40% of buses, and 80% of two- and three-wheelers by 2030. Also, the government hasinitiated favorable incentives aimed to boost growth of the EV market. Moreover, the technical skills of the country along with its low manufacturing costs and easy availability of components make the EV market of India a prime aspirant for future investment by auto bigwigs around the world.
Tesla has revolutionized the EV space the same way as
Amazon
AMZN
has changed the retail landscape and Netflix transformed entertainment. Tesla is undoubtedly the undisputed global leader in the EV landscape. Entering the India market will aid the company in achieving its objective of producing 20 million EVs per year by 2030.
However, Tesla’s Model 3 will take an imported route for its initial innings in India and therefore be subject to high import duties. Thus, Model 3 price in India is expected to start close to Rs 55 lakh, with higher variants bound to cost a fair amount more.
While the premium income group will rush to buy the luxurious Tesla car as a symbol of prestige, the car is relatively high priced for the average Indian buyers and might not appeal to them much.
This raises the question of how fruitful and impactful the India debut will be for Tesla. The EV market in India is currently dominated by the more budget-friendly Tata Nexon EV, MG ZS EV and the Hyundai Kona. The only premium EV currently sold is the Mercedes-Benz EQC, with the Jaguar I-Pace to be launched in January 2021. How Tesla manages to get accepted by this price-conscious market and become a mainstream offering here is a question that remains unanswered as of now.
Another challenge to the India EV market is the lack of adequate charging stations. Reportedly, currently, there are just 250 public charging stations in operation around the country. The EV sector in India cannot boom without proper and sufficient EV charging infrastructure in the country.
Tesla is betting on the India EV market, keeping in mind that the short-term return is likely to be low. Nonetheless, with Tesla likely to unveil a low-cost EV model in the coming years as well as the India market maturing and adapting itself to the needs of being fully electrical, Tesla may achieve more lucrative returns in the long term.
Nonetheless, if the company is able to capitalize on its brand name and convert its fanfare into tangible demand in India, it is set to ride the trending EV hysteria in the nation and create a niche market for its products there. It could also end up establishing its manufacturing plant in India. In fact, the states of Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu are all enthusiastic to have Tesla set up production there.
Other Updates
Recently, Tesla also entered a five-year agreement with China’s Sichuan Yahua Industrial Group to procure battery-grade lithium hydroxide worth $630-$880 million starting from 2021 through 2025.
Tesla also plans to integrate
Apple
AAPL
music and Amazon music into its user interface. Integration would enable drivers to play their streaming music through the in-car system, without using their phones to connect to Bluetooth and play.
Spotify
SPOT
music is already integrated into Tesla cars.
Tesla currently flaunts a Zacks Rank of 1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
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