Tesla finally launches in India, but the world's third largest car market has been a graveyard for western brands
Switch Auto Insurance and Save Today!
Affordable Auto Insurance, Customized for You
The Insurance Savings You Expect
Great Rates and Award-Winning Service
Tesla at long last has launched in India with the opening of a showroom this week in Mumbai, the smog-infested country's economic capital. It's a move that's been years in the making.
Fans are hailing it a game changer since it opens the EV brand up to the world's third largest car market by absolute volume just at a time when CEO Elon Musk's flagging sales badly need a jolt in the arm.
But Tesla isn't the first carmaker to find allure in the fast-growing economy. Many western brands have suffered trying to carve their own slice of the Indian pie.
Punishing import tariffs on cars the likes of which even President Trump has shied away from effectively force car companies to produce locally. Competition is fierce: local brand Maruti, the world's tenth most valuable carmaker ahead of rivals like Ford and Stellantis, dominates the market alongside domestic peers Mahindra and Tata. And it's difficult to be profitable, since those Indian consumers who can afford cars typically cannot stretch beyond low-margin subcompacts.
'None of the other brands that all had big hopes when entering the market have had any success,' PwC Autofacts analyst Steven von Arsdale tells Fortune.
When it comes to EVs specifically, demand—while growing—remains vestigial. Just 3% of the 1.97 million cars sold in India during the first half of this year were fully electric, according to figures van Arsdale provided for this report.
Fifth worst air pollution in the world
That makes just 60,000 cars in total, but the segment did expand at a rate of 23% year-on-year. 'That isn't a lot, but it is more than in Japan for example,' he adds. Just 17,700 EVs were sold in Japan over the same period, a share of just 1.3% of the Japanese car market.
'Even a small piece of the world's third largest market is certainly more attractive than [a large piece] in a wealthier place like Hong Kong or Singapore,' van Arsdale says.
India's EV segment has been led by the Tata Nexon EV, although now it is seeing heavy competition from the domestically built MG Windsor, in part because the expensive battery can be rented to reduce the price to the equivalent of some $11,500.
And while the EV market remains small, the government has set a target of 30% of the new car market being EVs come 2030. India could certainly do with more EVs on the road, since its air pollution is the fifth worst in the world, according to the 2024 World Air Quality Report.
Concentrations of hazardous fine particulates are on average over 50 micrograms per cubic meter, more than 10 times the recommended guideline by the World Health Organization. Twelve of the top 20 worst cities globally are all located in India, with New Delhi topping the list for the sixth straight year.
Indian consumers set to pay twice what the Model Y costs a U.S. car buyer
This week Tesla began taking orders for delivery in two metropolitan areas: Mumbai in the south and Delhi in the North. It is now offering the entry single-motor Model Y in two versions: standard range with 500 kilometers and long range with 622 km. Yet they come with a hefty price tag, starting at 61 lakh rupees when taxes and fees are included.
That works out to be approximately $71,000 for a vehicle that costs roughly half that in the United States. Duties of 70% slapped onto the hood of cars imported into the country account for the sizeable premium. A price like that firmly positions Tesla in the luxury end of India's car market—the MG Windsor for example can start as low as 10 lakh rupees if you rent the battery by the mile.
It is however shrewd that Tesla opted not to enter the market with a stripped down version like it did in Mexico, another emerging market. Indian consumers rejected the Tata Nano, a car deliberately designed to move low-income families from mopeds to cars, in part because the world's cheapest car lacked prestige and status.
'Indian consumers know the Model Y is a car sold around the world that a German or American driver would also buy,' he adds.
Modi's economic reforms
Many western brands were lured by Prime Minister Narendra Modi's push to reform a bureaucratic economy that stifled growth. His new Goods and Services Tax replaced a byzantine tax code that included oddities like the octroi, a city toll on goods originating in the Roman empire. Its abolishment in July 2017 was later described by The Hindu as an 'extinction event' for entire businesses that sprang up around this anachronism: 'like a meteor from outer space for the dinosaurs.'
Yet there are still large differences between regional governments. Taking delivery of a Tesla Model Y not in the Delhi but the neighboring satellite city of Gurugram (formerly Gurgaon) less than 20 miles away will cost a consumer. That's because a much heavier road tax levied in Gurugram's Haryana state adds an extra $6,700 to the purchase price.
These particular pitfalls so peculiar to India are in part why European carmakers Fiat and Opel closed up shop. Even Nissan's low-cost Datsun brand that chose India for its relaunch has folded. Volkswagen Group, number two in world behind Toyota, is still present, but continues to struggle.
'General Motors and Ford also tried to enter the market, even setting up manufacturing plant, but they were not competitive and ended up refocusing their plants towards export, because at least India's labor costs are low,' van Arsdale says.
This story was originally featured on Fortune.com
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
27 minutes ago
- Yahoo
Analysis-How Japan's election outcome muddles the BOJ's policy path
By Leika Kihara TOKYO (Reuters) -Japan's election outcome may put the central bank in a double bind as prospects of big spending could keep inflation elevated while potentially prolonged political paralysis and a global trade war provide compelling reasons to go slow on rate hikes. Lingering political uncertainty may also weaken the yen and push up import costs, some analysts say, adding to mounting price pressures that conflict with the Bank of Japan's current approach to stand pat until the political storm calms. The rising cost of living was among factors that led to the bruising defeat of Prime Minister Shigeru Ishiba's ruling coalition in upper house elections on Sunday. With inflation holding above the BOJ's 2% target for over three years now, some BOJ board members have already warned of growing price pressure. Junko Koeda recently argued for the need to monitor second-round effects from rising rice costs. Another board member, Hajime Takata, said this month the BOJ must resume rate hikes after a temporary pause as Japan was on the cusp of achieving the bank's 2% target. "If upward inflation risks heighten, the BOJ may need to act decisively as a guardian of price stability," its hawkish policymaker Naoki Tamura said late last month. Now a minority in both chambers of parliament, Ishiba's ruling camp must compromise with opposition parties, which have called for tax cuts and bigger spending, to pass legislation. In a nod to such calls, Ishiba said on Monday he would stay on as prime minister and work with other parties on measures to cushion the blow to households from rising inflation. While a cut to the consumption tax would leave a huge hole in Japan's worsening finances, doing so would require passing legislation through parliament and take time. More likely would be for Japan to compile an extra budget in autumn to fund payouts and tax breaks. The size could exceed last year's 14-trillion-yen ($95 billion) package given heightening opposition demands for bolder steps, analysts say. "A supplemental budget this fall to help firms cope with U.S. tariffs was expected even before the vote. Now, opposition parties may demand a larger package," said David Boling, a director at consulting firm Eurasia Group. YEN MOVES KEY To be sure, Japan's economy may need the fiscal boost after shrinking in the first quarter and seen taking a hit from U.S. tariffs that are already hurting its mainstay automobile sector. But market worries over Japan's huge debt and political instability could weaken the yen, and cast doubt on the BOJ's view cost-push pressure will ease later this year, analysts say. "With Ishiba signaling his resolve to stay on as premier, markets are now in a wait-and-see mood. But that doesn't mean the chance of yen declines has disappeared, as the election definitely weakened administration's standings," said Tsuyoshi Ueno, an economist at NLI Research Institute. Unlike other major economies, Japan's inflation-adjusted real interest rates remain deeply negative due to the slow pace at which the BOJ rolled back a decade-long, massive stimulus. After raising short-term interest rates to 0.5% in January, Governor Kazuo Ueda has signaled a pause in rate hikes until there is more clarity on the economic impact of U.S. tariffs. Given the risk from U.S. tariffs, many analysts now expect no rate hike for the rest of this year. But staff BOJ estimates suggest its policy rate must rise at least to 1% to reach levels that neither stimulates nor cools growth. In the end, a renewed yen decline could be the next decisive nudge towards further rate hikes, some analysts say. Although the BOJ is guaranteed by law independence from government interference, it has historically been sensitive to political developments. Its massive stimulus in 2013 was deployed after intense pressure from then premier Shinzo Abe to reverse a strong yen and beat deflation. The BOJ's exit from ultra-loose policy last year came after a flurry of calls from politicians to help stem sharp yen falls that were pushing up import costs. "For the BOJ, the biggest concern is how the election could change the government's focus on economic policy, and how markets could react," said a source familiar with its thinking. Veteran BOJ watcher Mari Iwashita sees the chance of a rate hike in October if the yen, now around 147 to the dollar, falls below 150 and puts upward pressure on prices. "Sustained yen weakness would push up underlying inflation, so could be a key trigger for policy action," said Iwashita, who is executive rates strategist at Nomura Securities. ($1 = 147.4300 yen) Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
27 minutes ago
- Yahoo
Exclusive-Indonesia plans $8 billion refineries contract with US firm amid tariffs deal, sources say
By Stefanno Sulaiman and Dewi Kurniawati JAKARTA (Reuters) -Indonesian sovereign wealth fund Danantara plans to sign an $8 billion engineering, procurement and construction contract with U.S. engineering firm KBR Inc to build 17 modular refineries, according to two sources familiar with the matter and an official economic ministry presentation seen by Reuters. The contract is part of last week's trade pact between Indonesia and the United States that led to a reduction in the threatened U.S. proposed tariff rate to 19% from 32%. Indonesian Economic Minister Airlangga Hartarto, the chief negotiator of the deal, disclosed the modular refinery plan during a closed-door briefing to Indonesian business leaders on Monday evening. Two sources confirmed the planned deal was mentioned in a presentation that Reuters also reviewed. Danantara and KBR Inc, formerly known as Kellogg Brown & Root, did not immediately respond to requests for comment. While some details of the trade deal between the United States and Indonesia have been made public, such as for increased energy cooperation, the proposed contract for refineries has not previously been reported.
Bloomberg
29 minutes ago
- Bloomberg
The Asia Trade 7/22/25
"Bloomberg: The Asia Trade" brings you everything you need to know to get ahead as the trading day begins in Asia. Bloomberg TV is live from Tokyo and Sydney with Shery Ahn and Paul Allen, getting insight and analysis from newsmakers and industry leaders on the biggest stories shaping global markets. (Source: Bloomberg)
