Tesla is finally in India. But can it go the distance?

India Today

4 days ago

After years of speculation, lobbying and negotiation, Elon Musk's Tesla has formally entered the Indian market. The company has opened its first showroom in Mumbai's upscale Bandra Kurla Complex and started bookings for the Model Y SUV. A second experience centre in Delhi is expected to follow soon, according to Reuters.This long-anticipated debut, however, brings with it more questions than answers about Tesla's long-term ambitions in the country.advertisementThe Model Y will be sold as a completely built import, with the base rear-wheel-drive variant priced at Rs 60 lakh and the long-range version at Rs 68 lakh. These vehicles are being shipped from Tesla's Gigafactory in Shanghai, its main export hub for Asia and Europe.
The Indian price tag makes the Model Y one of the most expensive Teslas in the world, substantially higher than the $44,990 starting price in the United States or the 263,500 yuan cost in China. The primary reason is India's steep import duties, which can exceed 100% for fully assembled vehicles.India recently overtook Japan to become the world's third-largest auto market. But Tesla's entry comes in the luxury EV segment, which remains a sliver of the overall landscape. Luxury electric vehicles currently account for just 4-5% of total car sales in India.Tesla's strategy, for now, seems cautious. The company has imported only six Model Y units along with Supercharger equipment and accessories valued at about $1 million, according to import data reviewed by Reuters.Ross Maxwell, Global Strategy Lead at VT Markets, believes the initial splash may be underwhelming. 'Tesla is currently too expensive for most of the Indian consumers, despite a strong brand presence already existing within the country,' he said. 'The immediate impact of the launch of Tesla's Model Y may be limited, but the longer-term strategic benefits may boost its growth trajectory in the years to come.'PRICING CHALLENGEThe pricing challenge is only one part of the equation. Tesla also faces a complex policy environment. India's import tariffs on fully built EVs are among the highest globally, posing a major obstacle to competitive pricing.A trade deal between India and the United States is currently under discussion. Reports in Business Standard say Washington is pushing for lower tariffs on American electric vehicles as part of a broader plan to double bilateral trade by 2030. However, geopolitical uncertainty looms large.With the possibility of Donald Trump returning to the White House—and his well-documented skepticism toward EVs and climate policy—the likelihood of aggressive US lobbying on Tesla's behalf could be limited. Musk's own uneasy relationship with Trump adds another layer of unpredictability to the equation.advertisementThis puts Tesla at a strategic crossroads. The company can wait for a breakthrough in tariff negotiations or make a bold move to manufacture locally.India's new EV policy offers a compromise. It promises reduced import duties of just 15% for companies that invest $500 million and set up a domestic factory. But the policy also mandates that firms must source 50% of their components locally within five years—a tall order for a company whose supply chains are deeply centralised.Maxwell sees this as Tesla's best shot at a sustainable future in India. 'India is a fast-growing but untapped market in the EV sector, with EV adoption below 2% even though it is the third-largest auto market globally,' he said. 'The Indian government has been in talks to offer tax benefits and subsidies to manufacture locally, offering Tesla a great opportunity to source and manufacture locally, boosting margins and making vehicles more affordable.'INTENSE COMPETITIONTime, however, is not on Tesla's side. While the company enjoys strong brand recognition, rivals are moving quickly.German automakers such as BMW, Mercedes-Benz and Audi already have electric models on Indian roads. They come with existing service networks and premium brand equity.advertisementTesla's most formidable challenger may be BYD, the Chinese EV giant that recently overtook it in global sales. BYD has launched the Sealion 7 and other relatively affordable models in India, but its expansion is hampered by stricter foreign investment rules for Chinese companies. Any major manufacturing ambitions BYD has in India would likely require a joint venture and a green light from wary policymakers—giving Tesla a temporary edge.WHAT NEXT FOR TESLA IN INDIA?The risk for Tesla is that it may remain a luxury outlier. If it delays manufacturing or fails to localise meaningfully, the Model Y will likely stay confined to a few metro cities, catering to a narrow band of affluent consumers. In contrast, homegrown players like Tata Motors and Mahindra are scaling up aggressively, already offering EVs that appeal to the broader middle class.Tesla's India chapter has begun. But whether it becomes a dominant player or just a boutique brand depends on how it navigates India's complex mix of policy, politics and pricing.The opportunity is enormous—a vast and largely untapped market, rising environmental consciousness, and government incentives all point to growth. But success will demand more than a showroom. Without a deeper commitment to the Indian market, Tesla risks stalling just after crossing the starting line.- EndsMust Watch