Tesla Inc

Introduction
Tesla, Inc is an American electric vehicle and clean energy company based in
Austin. Tesla designs and manufactures electric cars, battery energy storage
from home to grid-scale, solar panels and solar roof tiles, and related products
and services. Tesla is one of the world's most valuable companies and remains
the most valuable automaker in the world with a market cap of nearly $1
trillion.

Challenges facing by Tesla in India

India is considered a sleeping giant in the global EV market. Not just

because it is the fifth-largest auto market in the world, but due to its
sheer potential. You have an aspirational middle class, you have a
country that’s trying to reduce its carbon footprint, you have cheap
labour and access to raw materials and you have governments (state
and central) that seem to finally realise the massive upside of adopting
EV across the board.

So, it is not surprising that people often lament Tesla’s conspicuous

absence from the Indian market. It’s the most recognizable brand in
the ecosystem and yet, even after a decade, they are yet to make a
splash in India.But the absence though is not for lack of trying.

Tesla on its part has been teasing an entry since 2019. It has already
registered a company in Bengaluru. It’s hiring people in India. And as
many as seven Tesla models have been deemed roadworthy by Indian
authorities. Yet the cars haven’t seen the light of day quite yet and if
you’re wondering what’s the holdup, well, Tesla founder Elon Musk
dropped a hint recently.

1. Import duties in India

For starters, they really are some of the highest in the world. India
currently levies a 60% tax when an imported car priced below
$40,000 and 100% for those priced above $40,000. In contrast, most
western countries like US and Canada apply single-digit rates, with
emerging markets like China and Brazil levying rates of 22% and
35% respectively. With the import duties as is, even the most basic
Tesla model would cost upwards of ₹60 lakhs. Making it
unaffordable for most Indians.

2. Pricing challenge & customer base

Another challenge that Tesla will face in India is related to pricing.

Considering that the upper limit for an EV to qualify for subsidies in
India is Rs 15 lakh, Tesla’s expensive offerings will not qualify for
EV subsidies in the country, BNEF analyst Allen Tom Abraham told
Bloomberg.
It may be noted that an entry-level China-built Tesla Model 3 starts at
2,65,740 yuan or nearly $41,000. The cost of a Model Y sport-utility
vehicle crossover out of Shanghai starts from 339,900 yuan.

Besides the price, the cost of export and taxes on the Tesla cars upon
arrival in India will put it beyond the reach of most customers.
According to the Bloomberg report, 75 per cent of all Indian auto
sales occur in the $10,000 bracket or lower.

It is about half the average price in China and just 25 per cent of the
average price for vehicles in the US. This indicates that Tesla’s most
affordable car in India would only appeal to about 1 per cent of the
market, Abraham said. Therefore, Tesla’s volume of sales in India
will be marginal.

While there are challenges along the way for Tesla, the Indian EV
market is currently in a growing phase and its value could shoot up to
$206 billion in the coming decade according to a CEEW Centre for
Energy Finance study.

3. Fierce Competition

The Indian market for internal combustion engine vehicles is

dominated by local auto manufacturers such as Maruti Suzuki. As of
December 2019, Maruti boasted a 51.2% market share. Other
dominant players are Mahindra & Mahindra and Tata Motors.
Already, the signs point to this trend being replicated in the EV
market.

In the first quarter of the financial year 2020-2021, for instance, Tata
Motors commanded an EV market share of 62%. This was helped by
the launch of an electric SUV earlier in the year.
4. High Volume, Low Margin Environment

India may be the world’s fifth-largest car market, but automakers rely
on moving large volumes at low margins.

Some of India’s best-selling EVs are priced below three times the cost
of a Model 3, Tesla’s cheapest car. Tata Motors’ Tigor EV, for
instance, starts at Rs. 9.44 lakh (approximately $12,800) after
subsidies. Even with Tesla’s Model 2 price target of $25,000, it will
only attract a tiny percentage of Indian buyers. To be a meaningful
player in India’s EV space, Tesla would have to introduce cheaper
cars. That’s an uphill battle for Tesla at the moment.

5. Lack of EV charging infra

One of the most common challenges associated with owning an

electric vehicle is range anxiety. The lack of a robust and widespread
charging infrastructure adds to the misery of an EV owner. Even
though EV sales are seeing an uptick off late, they are being used for
intra-city travelling. However, the long-haul travel issue will soon
need to be addressed to increase the utilization limits of fleets and
allow people to travel across city limits.

A few Indian state governments have proactively floated tenders for

the installation of public EV charging stations and dozens of CPO
start-ups have mushroomed all over the country. However, most of
this infrastructure development is limited to Tier-1 cities and within
city limits only.

6. Lack of Standardization

If you know your EV terminologies, you would have heard about

different charger connector types. The most common ones are

 CCS / CCS Type 2

 Bharat AC-001/Bharat DC-001
 CHAdeMO
 GB/T
 Tesla Chargers

The EV connector type is provided on the car and on the EV Charger

as well. Currently, in India, all standards are being adopted and this
creates a problem with supply of EV charging stations. Most cars
support the CCS/CCS Type 2 charging connector standard; yet some
brands follow GBT or Bharat AC/DC 001 standards.

If the government decides on implementing one standard, then auto

OEMs and EVSE providers can focus on the production of just one
type of product. This results in faster manufacturing, reduced lead
times and the creation of a standardized charging network system that
is compatible with all EVs.
7. Power infra upgrades

Most residential users need to determine their sanctioned load, spare

capacity, and the power intake requirements of the EV charger. If
there is a mismatch, then they will need to apply for increased load.
This costs money. For example, if your sanctioned load is 5kW and
you want to install a 15kW DC charger then your present load would
not be able to accommodate the charger’s power requirements.

But there is one solution to this. Residential complexes and other

buildings need to look at installation common use charging stations
within their premises.

A complex will have a high sanctioned load and will be able to

accommodate EV charging. Apart from that, you don’t need to install
chargers in hundreds of parking slots for everyone.

Another challenge is for an EV owner staying in a house with no

power backup and frequent power cuts. In the event of a power loss,
you won’t be able to charge the EV. To fix this, you can look at solar
installations for power supply. Or during an emergency, a diesel
generator can be used to power the EV charger.

Key solutions to launch Tesla cars in India

Tesla’s move to enter India is certainly not aimed at selling its Model
3 in large volumes but to get an early-mover advantage when EVs
prices reach cost parity with conventional vehicles. Below are some
areas that Tesla should focus on during its initial years in the country:

1. By setting up a network of fast chargers

Tesla should set up a network of fast-charging stations in key cities,

where buyers can afford a $20,000 car, to tackle the range anxiety
issue that potential customers may face while deciding to buy a Tesla.
2. By studying the market

As Tesla is a new player, studying the local market, gaps left by

established players (like Daimler and BMW) and pain points of its
target customers is of paramount importance.

3. Brand building

The automaker should invest in building a brand which stands for

luxury, performance and innovation. Tesla should build on its already
positive word of mouth in the country.

4. Local manufacturing

Tesla should set up a local manufacturing unit for assembly and

battery to reduce costs and use it as an export hub for Southeast Asian
and African countries. Pro-investment polices like Make in India and
100% FDI route for the automotive sector have made India an
attractive country to set up local manufacturing.

5. Global R&D center

Tesla should set up an R&D center in the country, employing young,
tech-savvy engineers at a lower cost. Tesla can take advantage of the
country’s prowess in software development to improve its embedded
software, OTA and cloud ecosystems.

6. Special benefits for ancillary product makers

The Indian EV ecosystem is nascent. Ancillary product makers

(which are still less in number) are in the process of settling down.
This vital player of the EV ecosystem requires all possible
governmental support.
Reduced import and customs duties, along with sops for ancillary
players to set up manufacturing units will go a long way on this front.
Government-promoted special manufacturing zones is an ideal route,
where different EV ancillary players can set up units.

State Governments can be directly involved in the electric vehicle

manufacturing process. The Kerala Government is a trend setter
which recently tied up with a Swiss electric bus manufacturer to
locally assemble electric vehicles.

7. Lowering EV buying costs

At the moment, high EV prices are directly attributable to the

demand-supply factor and lack of a substantial domestic
manufacturing base. As a price-sensitive market, the majority of
Indian buyers look forward to attractive prices. If the suggestions
made above are taken to proper fruition, customers will be the biggest
beneficiary when it comes to attractive EV pricing models.

Our Government's vision is to transform India into a global EV

manufacturing hub. Backed by a determined Government, we have
already made a good start. Tailor made policy initiatives, rapid
implementation and industry-friendly regulation are essential to
ensure that the Indian automotive market assumes pole position in the
EV race as well.
Conclusion

With anything new, there will always be challenges. The EV industry

is still in a nascent stage in India but developing at a rapid pace. And
catching up to speed are the infrastructure requirements to support the
EV demand. Even with the current challenges, electric vehicles
present huge potential to reduce our carbon footprints and provide a
cost-effective system of transportation. And one way to contribute
towards this growth is to buy an electric vehicle.

Ultimately, the scope of Tesla’s market growth rests on availability of

market, Government policies, and charge point operators as well as
improvements to infrastructure and diversified options for consumers.

Realizing India’s EV ambition will also require an estimated annual

battery capacity of 158 GWh by FY 2030, which provides huge
investment opportunities for Tesla. Enabling policy support measures
are a critical need at this juncture.

The government appears to be aware of this. It has been rolling out

incentives to boost market demand in priority segments like electric
two-wheelers, and localizing production of key components like ACC
battery storage as well as electric vehicles and auto components
through respective PLI schemes. Besides, several Indian states have
now passed EV policies intending to attract industry investments and
make EV adoption more viable proposition for the consumer market.