Persisting Obstacles Bedevil Musk's Tesla in India's Market

Tesla, the renowned electric vehicle (EV) manufacturer, is currently testing Model 3 cars in several locations across India. This marks a significant step towards potential expansion in the Indian market, a move that has been long anticipated.

However, the road ahead is not without obstacles. With a global price tag of $39,990, the Tesla Model 3 becomes unaffordable in the Indian market, given an expected price tag of around Rs 60 lakhs due to import duties. This price sensitivity is a characteristic of the Indian market, and industry experts think Tesla may find it difficult to gain much market share.

Elon Musk, Tesla's CEO, has expressed frustration with Indian government regulations and FDI norms as obstacles for Tesla's entry into the Indian market. He has been trying to launch Tesla in India for several years, but concrete hurdles persist.

One of the main challenges is high import duty. Currently, India levies 100% tax on imported cars priced above $40,000 (Rs 30 lakhs), and 60% on cars below that price. This high duty rate makes Tesla's cars prohibitively expensive for the average Indian consumer.

In an attempt to navigate these challenges, Tesla wants to test the Indian market by importing cars before making any commitments for manufacturing. They have set up a corporate office in Mumbai, secured an office in Bengaluru, and are looking for key executives to start operations in India.

Meanwhile, another premium car brand, Mercedes-Benz, may potentially gain an early mover advantage due to Tesla's hesitation in launching locally-manufactured cars in India. Mercedes-Benz is planning to launch an India-assembled flagship electric sedan, 'EQS', this year.

From a long-term perspective, India's e-mobility sector is maturing, which could make India a good growth opportunity for Tesla. The Indian government is encouraging domestic automotive manufacturing through a performance-linked incentive (PLI) scheme, and several companies have already started supporting this.

However, the EV major would have to invest in setting up a manufacturing facility in the country to benefit from lower import duties and other incentives. The government may consider lowering import duty and offering other incentives to Tesla, but the concrete obstacles include regulatory and bureaucratic hurdles, high import duties on EV components, lack of local charging infrastructure, and challenges in sourcing affordable batteries locally. Additionally, India's complex taxation, stringent compliance requirements, and the need to make EVs price-competitive in a market dominated by low-cost combustion vehicles also pose significant barriers.

These factors collectively delay Tesla's entry and EV adoption in India. Despite these challenges, Tesla remains optimistic about its future in India and continues to engage with the government to overcome these obstacles and bring its innovative EV technology to Indian roads.