The world’s most valuable car company Tesla Inc’s entry into India is bound to give the much-needed boost to the image of India’s fledgling electric car industry. However, experts also say that with Tesla’s already premium price set to more than double thanks to India’s hefty import duties — and local manufacturing unlikely to materialise right away — it is expected to remain a niche player.

While an entry-level China-built Tesla Model 3 starts at a price of around $40,960, roughly amounting to ₹30 lakh, when imported as a completely built unit (CBU) into India, it will attract import duties and levies of 50-100 per cent. In an extremely price-sensitive market like India, at more than double the price, Tesla cars will face difficulties in garnering volumes, say experts. To be sure, the existing share of luxury cars in the overall passenger vehicle market is only around 1 per cent, despite multiple luxury car companies having had presence in India for many years.

“A Tesla car is an image builder. Tesla is not going to come to India for volumes. In India, there will be rich people who will buy it, and they will like to flaunt it — it will be an eye-turner. The strategy, perhaps, is not to get volumes, but to get presence,” says Sohinder Gill, director general of electric vehicle makers’ industry body, Society of Manufacturers of Electric Vehicles (SMEV).

However, given the brand image of Tesla, it will play a big role in alleviating doubts and concerns around electric mobility, according to experts.

Tarun Mehta, co-founder and CEO of Bengaluru-based start-up Ather Energy, says Tesla’s foray will significantly change customer attitude towards EVs and new technology adoption.

Making locally

But there is no denying that Tesla will have to set up a manufacturing plant in India to bring down its prices. “Given the tax policies that we have, it actually...drives organisations to start looking at manufacturing in India, because importing the entire car into India is not that profitable,” says Rajeev Singh, partner and automotive sector leader at Deloitte.

Suraj Ghosh, principal analyst - South Asia Powertrain Forecasts, IHS Markit, reckons that the market size of both the luxury and luxury EV segments in India isn’t big enough to prompt Tesla to manufacture locally. “But if Tesla thinks it can take advantage of India’s cost-effective manufacturing and use it as an export hub, then low domestic demand may not be a bottleneck anymore.”

There could also be a positive impact on the EV ecosystem if Musk sets up a charging infrastructure for Tesla cars, feel the experts.

“With Tesla’s entry, this is the first time when electric mobility will outdo petrol mobility — it will be much faster, much better, and much more smart connected than a petrol or diesel car. At what price is a problem. So, people won’t buy it, but then they will envy it, they will like it, they will love it,” says Gill.

“Premium EV imports typically meant for personal use are not expected to benefit from FAME-II incentives. The additional 1.5 lakh income tax deduction on the interest paid on EV loans will only give a marginal benefit,” says Hetal Gandhi, director, Crisil Research. Electric cars also account for less than 1 per cent of India’s annual car sales.

All said and done, Tesla’s entry into India may be unlike any other global automaker’s entry. “Tesla, as a brand, is already well-known in India, despite not having a single car on the road. And that speaks really volumes in terms of the brand perception in the country,” says Singh.

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