New Delhi:

Elon Musk is expected to visit India next week to meet Prime Minister Narendra Modi and announce an investment of $2 billion to $3 billion to build a Tesla manufacturing plant in the country.

Tesla has expressed interest in entering the Indian market over the past few years, but has been largely hampered by high import tariffs. However, with the recent announcement of reduction in import duties on electric vehicles (EVs) priced above $35,000, as long as the manufacturer provides an investment guarantee of Rs 4,150 crore and sets up a manufacturing facility within three years with a localization rate of 25% and subsequently up to With 50% localization within five years, it is now speculated that Tesla will finally enter the long-awaited Indian market.

Speculations are rife about Tesla’s plans in India. First, the $35,000 mark means Tesla can start importing all of its vehicles – the cheapest on the U.S. market is the Model 3, which starts at over $40,000. Tesla currently has a portfolio of four products.

We expect these products to come to Indian shores soon to compete in the premium and luxury EV segment. Tesla products are expected to have price advantages over existing luxury and high-end electric car manufacturers. In the luxury car sector, companies such as Mercedes and BMW have made some investments, but it remains to be seen whether they will qualify for the import tariff concessions under the new scheme.

The starting price of Mercedes’ electric cars in India is around Rs 80 lakh, while BMW’s cheapest EV, the iX1, costs around Rs 67 lakh. Price-wise, Tesla cars can even compete with products like Hyundai IONIQ 5 priced at around Rs 46 lakh and EV 6 priced at around Rs 61 lakh.

Tesla is expected to import products from Germany to India – production of the right-hand drive Model Y has already started at the Berlin Gigafactory.

The real story is Tesla’s entry into the mass market. The company has announced Project Redwood, a small mass-market electric car scheduled to be launched in 2025 and expected to be priced at $25,000 (roughly Rs. 20 lakh). This will go right into the territory of domestic EV manufacturers like Tata, Mahindra and even Maruti Suzuki, all of which are planning to launch EVs at different price points, including Rs 20-25 lakh. Market segments.

In fiscal year 2024, the electric vehicle market share will continue to remain in the low single digits (2%), but it will grow rapidly by 91% compared with fiscal year 2023.

India aims to achieve 30% electric vehicle sales by 2030.

The country’s electric vehicle segment is led by Tata Motors with over 70% market share. Nexon EV is one of Tata’s most popular products and is priced between Rs 14.50 lakh and Rs 19.90 lakh. Maruti’s much-anticipated entry into the electric vehicle segment, the EVX, is also expected to be priced around Rs 20 lakh to Rs 22 lakh.

On the other hand, this bodes well for Tesla’s entry into the Indian market, which is not only a market for its low-cost compact hatchback Redwood, but also a manufacturing hub for markets such as ASEAN and Latin America. India exported over 600,000 vehicles in FY24.

Although there have been media reports that Tesla will shy away from small electric car projects, the company has not confirmed those reports. Elon Musk took to X (formerly Twitter) to push back against media reports on the matter.

Tesla factory

Tesla has factories in the United States, Germany and China. India will become the fourth country to host a Tesla manufacturing plant.

American factory

Fremont factory, California, USA
Gigafactory Nevada, USA
New York Gigafactory, USA
Gigafactory in Texas, USA

Facilities outside the United States

Shanghai Gigafactory, China
Berlin-Brandenburg Gigafactory, Germany

Elon Musk came to India at a time when electric vehicle sales were slowing in large global markets such as the United States, forcing Tesla to reduce its size by 10%.

Tesla also faces stiff competition from Chinese manufacturers, which rely on low-cost manufacturing to offer electric vehicles at very economical prices.

In 2023, Chinese electric and hybrid car maker BYD sold more than 60% more cars than Tesla.

Entering India will not only allow Tesla to enter the third largest automobile market, but also help it diversify its layout and gain manufacturing cost advantages.