Global brokerage firm CLSA said that the entry of American EV major Tesla won't significantly impact the already existing automakers in the domestic market, including Maruti Suzuki, Hyundai Motors and Tata Motors, among others.
Tesla's cheapest car model retails for over $35,000 (over Rs 30 lakh) in US. This is significantly higher than the average selling price of cars in India, which stands at nearly Rs 12 lakh, CLSA noted in its recent note to clients.
The brokerage said that along with the high prices, Tesla cars will also come at a significantly high import duty of up to 110 percent. However, this is set to reduce as the guidelines for the new EV policy are expected to lower the duty to 15 percent.
Yet, CLSA believes that road tax, insurance and other costs added to on-road price would keep Tesla's minimum car price at over Rs 35 lakh. "We believe that if Tesla positions itself with Model 3 at an on-road price that is around 20-50 percent higher than models like Mahindra XEV 9e, Hyundai e-Creta, Maruti Suzuki e-Vitara etc, it would not significantly impact domestic EV models. Factors such as spacious interior, features, aesthetics, better resale value visibility and right pricing are the key drivers in car purchase decisions, regardless of the powertrain, in our view," CLSA said.
"If we still assume that Tesla launches a model worth less than Rs 25 lakh on-road model in India and gains market share, we believe recent de-rating of Mahindra & Mahindra is already pricing this in," it added.
In case Tesla launches an electric vehicle worth under Rs 22 lakh to suit the Indian market, CLSA feels the features and specifications would be meaningfully compromised as against its traditional models abroad. "Therefore, Indian OEMS offering compelling features and competitive pricing, we do not anticipate any significant threat from such a launch by Tesla. Even if we assume that the import duty is revised to around 15-20 percent, the price would still be higher than most of the 4m+ long electric SUVS offered by domestic players like Maruti Suzuki, Tata Motors, Mahindra & Mahindra and Hyundai Motors India," it said.
Also read: Tesla posts job opening for Pune after Mumbai, Delhi
"We believe Tesla would need to establish manufacturing in India to scale up with its current portfolio and price its vehicles at less than Rs 35 lakh to Rs 40 lakh on-road, even if import duties are reduced to sub-20 percent levels," CLSA said.
The brokerage also noted that electric vehicles, the segment on which Tesla focusses on, have a penetration of only 2.4 percent in the India market. "Tesla has a global market share of 15% in BEVS, with China and the US being its largest markets, where it holds 10% and 40% market share, respectively," it said. CLSA, however, added that it expects the EV penetration to increase to 15 percent by FY28 and to 25 percent by FY30.
"Thus, even if we assume Tesla gains market share of approximately 10-20 percent in EVs by FY30, it would imply overall passenger vehicle share of around 2-5 percent," it said.
Also read: Tesla in India: Elon Musk's firm likely to import cars from German unit, skip China
"We believe the situation would be similar to the question of acceptance of Harley X440 bikes by Indian consumers, which are priced around 20 percent higher than RE Classic 350, with sales figures of nearly 1,500 units and around 28,000 units per month, respectively," CLSA concluded.
Notably, Tata Motors, Mahindra and Mahindra (M&M) and Hyundai Motor India shares fell up to 6 percent on February 21 following reports that the government may ease EV import rules, paving the way for foreign players.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
