With the opening of its first showroom in Mumbai this week, Tesla (TSLA) formally entered the Indian market. This marked a measured but calculated entry into one of the most exciting — yet challenging — automotive frontiers in the world.
In Mumbai, the financial hub of India, a “Tesla Experience Center” was unveiled inside a posh mall. For the time being, the company only sells the updated Model Y, which is imported from China. Pricing, however, might be difficult. The base Model Y rear-wheel drive starts at 6.1 million rupees (about $70,000), which is significantly more than its $44,900 U.S. equivalent because of India’s nearly 100% import duties.
Tesla enters market in India in hopes of large market potential
Analysts anticipate low initial sales due to the high prices and India’s average yearly income of about $4,000. Even though India has the third-largest automobile market in the world, only 4% of all cars sold there are electric.
However, there is a big long-term opportunity. The OECD predicts that while China’s population is declining, India’s will surpass 1.7 billion people by 2050. According to domestic think tank PRICE, by 2030, there will be 25 million wealthy households and 75 million middle-class households in India, making up more than half of the country’s population.
If Tesla can successfully negotiate India’s protectionist laws, that demographic shift could generate a sizable market for luxury automobiles. Historically, foreign companies have been encouraged to manufacture locally by India’s tariffs. In order to discuss bilateral trade issues, India’s trade delegation recently traveled to Washington as part of ongoing negotiations. Elon Musk, the CEO of Tesla, has proposed constructing a factory in India for both domestic and international markets. However, Tesla has recently turned its attention to AI and autonomous driving technologies as the demand for EVs has decreased globally. However, funding for research and development might provide a compromise.
“In the future we wish to see R&D and manufacturing done in India, and I am sure at an appropriate stage Tesla will think about it,” said Devendra Fadnavis, chief minister of Maharashtra. The door appears to be open given Musk’s recent meeting in Washington with Indian Prime Minister Narendra Modi. In an attempt to draw in international investment, Modi has pushed for regulatory changes, and Tesla may be a prime example of that.
Featured Image Credit: Matt Weissinger; Pexels: Thank You!
