Elon Musk says he is ready for India, but is India ready for Tesla?

Elon Musk’s tweets are accompanied by not insignificant doses of thrill, trepidation, skepticism and….déja vu? Back in early 2017, when Musk’s star was steadily on the rise, soaring in tandem with his stock value, he was asked by one of his many Indian admirers on Twitter, just when Tesla was arriving in India. His response was an optimistic but non-committal “Hoping for summer this year”.

Flash forward to October 2020, a time when brand Tesla is stronger than ever (while brand Musk has accrued a litany of own-goals) and Musk has sparked much speculation by responding to a similar query on Twitter. Musk’s tweet stating that Tesla will launch in India by “Next year for sure” hasn’t been substantiated by an official statement from the company, much like it hadn’t been in 2017 or in 2019 when he promised the Indian finalists from the Hyperloop Pod Competition that Tesla would be operating on Indian soil in a year. And yet, in all these instances, it has had Tesla fans waving imaginary wads of cash at the apparition of a gull-winged Model X—when a real one may not be on the immediate horizon.

Let’s talk hurdles

One of the chief spanners in Tesla’s India plans proved to be the issue of localisation. Given India’s restrictive policies around the issue, which require 30 percent of the parts to be sourced locally – the supply for which, according to a statement from Musk, made in 2017, did not exist. While the central government claims that several archaic trade policies have been or will be scrapped soon, there’s been no communication on the localisation front. In fact, they seem keen to double down on it.

As of August this year, the government has met with several key players in the automotive segment to increase localisation in the automotive sector. The move is accompanied by a need to reduce the country’s dependence on import of raw material, particularly of components needed to manufacture electric vehicles, in accordance with its
Automotive Mission Plan.

Come here please, Mr Musk

Perhaps this, along with the fact that state governments, like Karnataka’s, are keen to lure in foreign investors to boost employment in a pandemic-ravaged economy, is the impetus needed by brands like Tesla to set-up a manufacturing base. The recent reduction of GST on EVs to 5 percent may also have also partially addressed Musk’s vocal concerns regarding “challenging government regulations”. However, custom duty hike (on CBU and CKD imports) continues to remain a concern, further suggesting that the only way Tesla can thrive in the Indian market, is by setting up a manufacturing unit that allows the cars to be sold at a lower price.

After it was made clear to Tesla that no quarter will be given to them by the Indian government, as it might have other corporations clamouring for similar perks, the brand set its sights on China. As the largest EV market, China served as a strong base to set up its battery-making motherlode: the Gigafactory. However, Musk recently announced (on Twitter) a plan to set up another Gigafactory in Asia, outside of China, causing many to speculate that India, given its market size, is the likely destination.

So what will Tesla have to contend with should it arrive in India? For the moment the only luxury carmaker with an EV offering is Mercedes-Benz with its EQC which comes in as a CBU. While the likes of their entry-level offering – the Model 3 – will be sold at a lower price point, Tesla enthusiasts and buyers aren’t likely to overlap in a big way, as pricing would put their cars on a par with top-shelf luxury offerings.

Tesla will also have to set up a network of superchargers across the country, and neither of these impediments suggest that the brand will be a volume player, which, unlike other car brands dabbling in the EV space, it needs to be. Is Tesla really coming to India? Eventually, it depends on the government’s road map to aiding EV manufacturing becomes clearer.

Will it be in 2021? Smart money is on the possibility of it taking a little longer.

Parth Charan is a Mumbai-based writer who’s written extensively on cars for over seven years.