Tesla and the EV market
14 September 2021
"Even if Tesla’s valuation is better than Toyota and Volkswagen its sales are one third as compared....."
Tesla is trying to make a rapid insurgence into the EV market in Bharat. The Automobile market in Bharat is the 5th largest in the world. It makes sense for Tesla to have an ambition to dominate in Bharat as its bid to establish itself as the world’s largest Auto manufacturer. Even if Tesla’s valuation is better than Toyota and Volkswagen its sales are one third as compared to the legacy manufacturers. Tesla needs to succeed in markets of Bharat and China to establish its supremacy. In January, the company registered Tesla India Motors and Energy Private Limited as a subsidiary and set up an office and R&D facility in Bengaluru.
Challenges before Tesla
Last week it was reported that Bharat’s Ministry of Road Transport and Highways tested four Tesla models and certified them to be roadworthy. The 4 models tested were different variants of Tesla model 3 and model Y. Elon Musk has said in the past that Tesla is very likely to setup a Giga factory in Bharat. But for now Tesla intends to import cars from its Shanghai Giga factory. There are lots of challenges for Tesla to be successful in Bharat; firstly the steep excise and import duties can double the price of any imported car.
Then there is the market itself, consider the Tesla Model 3 rear wheel drive “Standard Plus” Variant starts from 29.2 lakh and adding up those import duties it costs twice as much. This costing puts Tesla in the very small luxury car market in Bharat with competition from Audi, BMW, Mercedes, etc. Last month a BMW 3 series which starts from 42 lakh only sold about a 1000 cars in Bharat, compare that to Tesla Model 3 in the US it sold over 7500 cars. There is no official word from Tesla about the car launch in Bharat or the details about the models of cars being launched. Elon is very vocal about his demands for greater Tax rebates in Bharat, there is no official announcement from the Bharatiyan government about reducing import taxes. Bharat’s Transport minister Nitin Gadakari has said “The Government will make sure the production costs for Tesla will be lowest when compared with the world, even China, when they start manufacturing cars in Bharat. We will assure that”.
Alternatives for Tesla
Enough about Tesla, the American manufacturer is very new to Bharat’s market. I want to shed some light on the legacy car manufacturers in Bharat and their efforts to clean up the clogged up cities. Bharat is currently the third largest emitter of pollution but to counter that we don’t really have any decent or affordable EVs. Tata Motors have launched two EVs under the 15lakh bracket, the Tigor EV and the Nexon EV. The other two electric vehicles are offered by MG motors and Korea’s Hyundai, the MG ZS EV starts at 21 Lakh and the Hyundai Kona electric costs 24 lakhs, both the higher end of the market and out of budget for most consumers. Mercedes, Audi and Jaguar have also entered the EV market with the Audi E-tron starting at 99.99 lakh, the Mercedes Benz EQC priced at 99.30 lakh and Jaguar I-Pace costing upwards of 1 crore rupees, all of which are for the ultra-rich people in Bharat.
The Government’s role
The Government is pushing all the automakers to manufacturer EVs, but the shift to EVs is happening far slower than other countries. Many legacy manufacturers in Bharat are hesitant to make a switch due to a non-existent charging infrastructure and the high price of electric models. Tata Motors, Mahindra & Mahindra, TVS Motors and Bajaj Auto have entered the EV market and have the capability to increase production. Government has introduced initiatives like Faster Adoption and Manufacturing of Electric Vehicles in Bharat Phase-II (FAME-II) scheme, along with the EV policies of states, are expected to boost production of EVs. On the manufacturing side, the government’s production-linked incentives have made it easier for automakers to produce EVs. The Government has invested ₹18,100 crore production-linked incentive schemes for manufacturing of advanced Chemical cell batteries, but the investment won’t bear fruits for another 5 years.
The EV industry in Bharat faces its biggest hurdle in its dependence on China for batteries or advanced chemical cell batteries, as the country has no cell production. China is also a key supplier of the sub-components used in electronics, alloy wheels, tyres, etc. A critical component in EVs is the control circuit used for the electric motors; Bharat has imported Monolithic integrated circuits- digital worth 1966.7 million in last three years from China. It is increasingly difficult for any manufacturer to localize production and the import duties make it almost impossible to boost EV sales in Bharat. Many manufacturers and Musk have voiced their concerns about the taxes levied on imported and locally made vehicles. Hyundai’s SS Kim MD & CEO has urged the government to offer subsidies to individual buyers to spur the demand for electric vehicles.
History isn’t really on Elon Musk’s side, global car makers have struggled to make a mark in Bharat. Automakers who have locally manufactured cars have found it very difficult to compete with cheap and basic models sold by Maruti and Tata motors (Recently, GM and Ford exited the market sighting low sales). The only global manufacturer to have enormous success in Bharat is Hyundai. This is something Elon needs to consider before entering into the market in Bharat. As for the current state of the EV Market, there is a lot of hope due the numerous government schemes and investment of legacy automakers into the EV market. For the common consumer it is still impossible to own an EV due to the lack of charging network. The government and private entities like Tata Power have started to provide EV charging solutions, but an ecosystem for EV charging stations as abundant as Fuel pumps is far ahead in the future. For anyone who dreams of owning a Tesla or any other electric vehicle sit tight, an EV future is just around the corner……