Case Study | Tesla: Hurdles in India

Tesla's logo and cars

Elon Musk’s electric vehicle manufacturer Tesla is all ready to kick start its selling in India soon. They are ready to sell its base model. Many of Tesla’s fans were jovial to know about Tesla’s entry, but capturing the market is undoubtedly the most significantly tedious task the company has had until now.

Union Minister for Road Transport and Highways, Nitin Gadkari, confirmed that Tesla will begin its operations in India early next year.

Challenges in India

The nation might announce to take steps to develop electronic sales, but is it sufficient enough to incline the sales of Tesla’s expensive Electronic Vehicles (EVs)? Maybe not. India launched the Faster Adoption and Development of Hybrid and Electronic vehicle (FAME) in 2015, which included an INR 900 crore pledge to subsidies for electric tricycles for buses, following the International Energy Agency.

Another FAME program was launched with INR 10,000 crores in 2019 to allow the general mass to purchase electric supplies. Additionally, the government reduced the Goods and Services Tax (GST) on electric vehicles to 5 percent by August 2019.

India’s tax rates for cars are one of the highest globally, including a 28 percent GST and charges ranging from 3% to 22%. Even though subsidies for electric cars remain in cities like Delhi, they are not ample for people to purchase Tesla’s cars.

Moreover, Toyota, Ford, Harley Davidson are all planning to leave, with Harley Davidson, who already left the scene, attributing to the high taxes. Therefore, this prevails as a challenge for Tesla since big companies are withdrawing due to higher taxes.

Also, the pricing

Tesla’s greatest and primary challenge is pricing in India. Bloomberg New Energy Finance (BNEF) Analyst Allen Tom Abraham said that the highest limit for EVs in India to be eligible for subsidies is INR 15 lakhs. Building Tesla Model 3 in China started at 265,740 yuan, which is around $41,000. So, the export prices and charges on Tesla’s cars will not meet a significant number of consumers when they enter India.

Abraham states that this is just half of China’s average prices and around 25% of the USA’s average vehicle prices, which implies that Tesla’s cheapest car will barely attract 1% of the market in India. What happens next is a factual guess! Also, while Tesla is encountering hindrances, India’s demand for electricity is now inclining, according to a study by the Council of Energy, Environment, and Water (CEEW).

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