This week in Auto: Here’s why Tesla's India entry should mean more than just flashy electric cars

Finally, the world’s most valuable automotive company Tesla, Inc has an India address. The American electric car maker registered its India subsidiary earlier this week, bringing cheer to not just auto enthusiasts but also to electric vehicle (EV) manufacturers. More on this later. Here is a wrap on what else made headlines in the auto space during the week:

Toyota withdraws lockout

Toyota Kirloskar Motors (TKM) has withdrawn the official lockout at the two manufacturing plants in Bidadi, Karnataka. The Bengaluru-based carmaker started the second shift at both the plants from January 13.

Toyota, however, refused to revoke the suspension pending inquiry of 66 unionised employees it has accused of "serious misconduct". “Employees returning to work will sign a simple undertaking for good conduct and report to work," TKM said in a statement.

Tractor demand hit the roof in 2020

Covid-19 failed to deflate demand for tractors in 2020 as sales hit an all-time high and beat 2018 volumes, the best, so far, for the industry.

Tractor sales in the domestic market closed at 802,670 units in 2020, 11 percent higher than 2019 volumes and 1 percent more than 2018, according to data supplied by the Tractor and Mechanisation Association, the apex industry lobby.

Tesla finally makes it to India

Tesla, the world’s most valuable carmaker, has launched an Indian subsidiary as it prepares to create a much-awaited manufacturing plant and R&D unit in India.

The unit named Tesla India Motors and Energy Private Ltd was incorporated in Bengaluru on January 8 and Vaibhav Taneja, Venkatrangam Sreeram, and David Jon Feinstein have been named as directors, according to disclosures with the corporate affairs ministry.

Mercedes, BMW sales nosedive in 2020

The sales of Mercedes-Benz nosedived 43 percent in 2020 after the COVID-19 pandemic eroded the luxury car demand, pulling down overall volumes to a multi-year low.

The Pune-based company clocked retail sales of 7,893 units in 2020 as against 13,786 units sold in 2019. This is the lowest total since 2012 when Mercedes-Benz sold 7,138 units.

A good December 

New launches, advance buying due to price hikes in January, decade-low interest rate on auto loans and positive sentiments helped bring fresh demand for passenger vehicles and two-wheelers during December, even as the auto industry remains cautiously optimistic about 2021.

Domestic wholesale volumes (from company to dealers) of cars, utility vehicles and vans rose nearly 14 percent in December to 252,998 units as against 222,728 vehicles in the same month last year, Society of Indian Automobile Manufacturers (SIAM) data showed.

Tesla is not just a company, it’s a bright ray of hope

For years, the government has been trying to make electric vehicles as mainstream as petrol and diesel vehicles. Subsidies, tax breaks, fee waivers and incentives on investments, the government tried to give electric vehicles a major fillip.

Meanwhile, the manufacturers and potential investors weren’t really all that excited and their concern was genuine. While large corporations were willing to invest in EV development, it dawned that the component supplying pack was not equally enthusiastic.

Parts suppliers do not depend on one company for their business and therefore it made little economic sense to make fresh investments for component development and creating capacity as per the specifications provided by the client. Plus, volumes were a key decider for investment. With no proper outlook on demand, the level of skepticism only went north.

Further, the auto industry was unable to understand if the onus of erecting the massive and capital-intensive charging infrastructure was on the government or the private sector and the time it would take to have a decent network of charging stations to kickstart the EV revolution in the country.

The industry was in a Catch-22 situation. The government wanted the auto industry to accelerate EV switchover, the auto industry expressed helplessness at the total lack of a suitable ecosystem for the switchover and so the EV buyer did not have an electric vehicle to buy or charge it and hence no demand.

Enter Tesla. According to senior executives managing the EV affairs for some noted companies, Tesla will bring with itself not just high performance, technology-rich cars but will also drive business for others and build the missing ecosystem. If Tesla invests in a local factory in India, parts suppliers will tie-up with the American giant for component supply contracts.

Once that commences, it will bolster the confidence of other EV manufacturers to develop electric vehicles who will then be assured of consistent parts supplies. The missing EV buyer will thus have more options to choose from. More options would mean, greater scale of manufacturing and lower vehicle costs and greater demand.

With a higher demand, the need for a greater and better charging infrastructure will force the government to award contracts for charging stations or expedite the execution of existing contracts.

So dear Tesla, welcome to India.