Recently, Elon Musk in a tweet confirmed that Tesla will be entering the Indian Market in 2021 and it is also in talks with Maharashtra and Karnataka state governments for setting up its first research and development centre.
Tesla has become one of the world’s largest automobile manufacturers. Their electric vehicles are some of the fastest and coolest cars that use advanced technologies to combine performance and feasibility in an astonishing way.
Co-founder Elon Musk’s net worth raised more than $14.5 billion on January 8, 2021, fueled by another surge in Tesla’s share prices said the Bloomberg Billionaire Index. The current net worth of Elon Musk is around $209 billion which makes him the richest man in the world.
Also, Tesla’s market capitalization outshined Toyota’s for the first time at the beginning of July 2020, making Tesla the most valuable automotive company in the world. They have also achieved a milestone of selling 1 million vehicles worldwide till October 2020.
Tesla’s market cap is worth around $834.17 billion that’s more than Ferrari, BMW, Volkswagen, Ford, Honda, and Fiat Chrysler combined.
And if we’re looking for companies outside of the auto industry, Tesla is worth more than companies like Disney, Walmart, Nestle, Intel, Nike, Samsung, Unilever, McDonald’s, Reliance, and Coca-Cola, I mean I could go on and on because Tesla is currently at number 6 in the world in terms of valuation.
They have factories in the United States, Germany, the Netherlands, and China and you can buy the Tesla in all of those countries as well as other countries like New Zealand, and all over Europe, in Jordan, United Arab Emirates, and South Korea, Canada, Mexico, Australia, and Taiwan but there is one country that I did not mention in this list, it is a country where 17% of the world population lives and it is India.
Despite having a massive fan-base in India, why Tesla hasn’t entered the Indian market yet when literally all the other companies that I’ve mentioned are doing well? Why did they wait for so long?
Well, there are a few good reasons.
Well, if you are lazy enough to read, you can also watch this detailed video if you want!
So, where was I, yeah, reasons, right.
1. The Money Problem
The cheapest electric car Tesla has on the market right now, the Model 3, without any of the additional features that Tesla is known for, costs $39,990, so without adding costs like shipping and import tax, it would cost Rs. 29.5 lakh in India.
For a country, like India, where the per capita income is Rs 1.55 lakh ($2,104) per annum, the cost of buying a Tesla is elevated than in most countries.
How High? Well, if you overlook expenses like rent, food, their phone bill, and transportation, and the high import tax, it would take an average Indian over 18 years to save up enough to buy a Tesla.
Comparing the situation with the US in this expense-free hypothetical world, the average income of a person is more than $65,000 (Rs. 48 lakh) which would take an average American to afford a Tesla in just 7 months.
In other words, the average Indian would have to work 28 times harder than the average American to buy a Tesla.
But the money problem issue is pretty similar across the borders. Like in Mexico and China where Teslas are available, an average person takes almost 4 years to buy a Tesla, and in Jordan, it takes almost 9 years.
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So my point is, these are substantial amounts of time and an average Mexican or Chinese or Jordanian cannot afford a Tesla, so why is Tesla targeting these markets while continuing to ignore India?
Well, the answer lays in these countries’ wealth distributions.
1.1 Wealth Distribution
In Jordan and Mexico, there is only one Tesla car showroom which is located in the country’s capital as the majority of the country’s wealthiest people live there.
In fact, the capital of Jordan, Amman, is known as the Silicon Valley of the Middle East. It is one of the best cities in the Middle East to launch a tech startup.
And in the case of China, an average person takes 4 years to buy a Tesla but for an average Hongkonger it only takes 9 months and in Macau, it takes 6 months.
This map shows wealth distribution in China.
This data is a little bit dated but we can get a rough idea of where China’s wealthiest people live and correlate with this tesla’s map of various stores service centers and charging stations.
Clearly, Tesla has strategically chosen to target China’s upper-middle and upper-class citizens which make it worthwhile for Tesla to operate in the country.
So let’s try the same exercise with India, where the rich pockets of India are and where the people who live in those pockets can afford Teslas.
Most of the wealth pockets are located around the metro cities like Mumbai, Delhi, Hyderabad, and Kolkata which have an average GDP per capita of $3833 (Rs. 28 lakh) as of 2018.
But it is still behind the poorest country that Tesla operates in, which is Jordan which has a GDP per capita of $4330.
However, Jordan’s population is around 10 million whereas some of the India’s metro cities have more people than Jordan has.
So even if Tesla opened just one store in Mumbai, India’s richest city, they would probably earn more money from India than from Jordan, at least if you ignore all the other factors that are preventing Tesla from entering India.
2. Lack of Infrastructure
India’s major inadequacies while accommodating electric vehicles are the country’s road state and lack of charging stations.
2.1 Country’s Road State
India’s road state is very bad and dangerous for citizens. Traveling by road in India is not a piece of cake. Actually, India leads the world in traffic-related deaths.
As we all know, from April 2019 Tesla is coming with a pre-installed autopilot feature. This feature includes advanced driver assistance such as lane centering, automatic parking, traffic sensitive cruise control, automatic lane changes, semi-autonomous navigation on limited-access highways, and the ability to call your Tesla from a garage or parking space.
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So in a country like India, this feature doesn’t make any sense because painted lanes on roads are very uncommon, even in metro cities, it is not guaranteed.
While talking about parking spots, people tend to park wherever they find a spot or on a sidewalk. And a lot of people literally don’t follow the speed limits as they are riding underpowered vehicles or pulled by animals.
Speaking of animals, they are everywhere; the roads are filled with stray dogs, cows, pigs, and what else we don’t know.
And due to the huge population, roads are filled with people and many other obstructions like potholes or insane speed breakers or humps which kill hundreds of thousands of people every month.
So Tesla’s pre-installed autopilot will also not make sense and it could end up killing more people than making life easier.
So before launching in India, Tesla has to think about these certain issues because autopilot does kill people now I’m not saying that it kills people more often than it doesn’t.
In fact, Tesla has in-built safely features like emergency braking, automatic swinging to avoid collusion, automatic steering to keep the vehicle from drifting off the road in case you fall asleep and many more.
There is a website called Tesladeath.com which is detailing every single death that ever occurred in Tesla or involves Tesla.
Even though only 5 deaths are ever happened due to the direct result of autopilot but it may go up if Tesla allowed autopilot in India.
2.2. Lack of Charging Stations
The biggest hurdle in the EV market for Tesla is the lack of charging stations. India currently has around 250 charging stations.
And according to Bloomberg, India has only sold 8000 electric cars in the past 6 years. In a bit of context, China sells more than that in just two days.
So for each charging station, there are 32 electric cars which look good compared to the ratio of gasoline pumps for combustion engine cars which are 500: 1.
And if you saw the above map minutely, you will find that there is irregularity in the distribution of charging station.
Basically, the majority of charging stations are only in the metro cities while some states don’t have a single charging station.
Compare this situation with the US; there are around 26000 charging stations with more than 84000 plugs across the United States.
This map shows the total number of Tesla’s charging station in the US.
If you add Energy Company charging stations and public government-run charging stations, this map would be more crowded.
In the context, if all the charging stations were used simultaneously, they could charge 68,800 electric vehicles at a time.
So before launching Tesla in Indian Market, Tesla has to think over this situation. If they enter the Indian market, they will not only have to invest their money in manufacturing vehicles and building factories, but also in building a strong network of supercharging stations to make their cars more functional.
3. Lack of Demand
In India, the demand for luxury cars and bikes, and EV vehicles is still not established. Because India’s market is very different.
For example, Harley Davidson just sold only 10,000 units in the last year which resulted in the closure of their operations in India.
Indians just don’t buy the product, if it’s unrealistic for them, no matter how advanced technology you are offering!
But the government is also taking initiatives to change the EV’s landscape. Like as per reports, the government is thinking to install 69000 charging stations at petrol pumps. But in reality, it is just on paper and it is far as possible.
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In 2017, it was estimated that under the Indian government’s NEMMP (National Electric Mobility Mission Plan) 2020 scheme, there would be between six and seven million EVs on India’s roads by 2020 but it’s 2020 now and India isn’t even close to reaching 1 million EVs.
And in the 2019 budget, the government introduced an income tax exemption up to 1.5 lakh rupees on the purchase of EV.
But due to high ownership cost, poor resale value, only 1309 vehicles were sold between April November 2019 in this low demand EV market.
So we all know that the future is electric, and day by day climate change is having more impact on our planet, there will be more environment friendly, less- noisy vehicles.
And India is a fertile market for electric vehicles. But if we don’t start to buy more electric cars as our first choice, only a few rich will buy them for their garage and there will be no electric revolution in our country.
4. Government Policies
The main hindrance for Tesla to enter the Indian Market was the Indian Government and its local protectionists’ policies.
Like India’s Crazy Import Tax for cars, for example, cars which cost more than 40,000 dollars (29.5 lakh), the import tax is 100%, for cars that cost less than 40,000 dollars. (Rs. 29.5 lakh) the import tax is 60%, a hefty bill for Tesla or Indian consumers.
I’m told import duties are extremely high (up to 100%), even for electric
cars. This would make our cars unaffordable.— Elon Musk (@elonmusk)
August 1, 2019
The purpose of the insane import tax is simply to keep completion out of India while the Indian government dreams of making India the world’s largest producer of electric vehicles.
In fact, Road transport and Highway Minister, Nitin Gadkari said in a webinar “I am confident that in five years; India will become the number one hub for manufacturing electric buses, cars, and two-wheelers. There is also a blessing in disguise that majority of countries are not interested in dealing with china anymore, so now there is a huge potential for India”.
So the Indian government sees that to influence the global EV market, they need to protect its local EV market from heavily funded and highly competitive foreigners namely the United States and China.
5. The Solution
As per my point of view, there are three ways for Tesla to enter the Indian Market.
5.1 Policy Reform
According to Elon Musk, Tesla generally builds the factories with the money they made from the sale of Teslas in the country.
For other countries, we pay in part for the local factory by selling cars
there ahead of time. Also, gives a sense of demand. Current rules in India
prevent that, but recent changes in sales tax give hope for future changes.— Elon Musk (@elonmusk)
August 1, 2019
The problem here is that Tesla can’t sell their vehicles to India because they won’t make money due to the high import taxes, which means there is no money and no factory.
But what if the government makes an exception? For example, they can temporarily reduce or even eliminate these taxes on a case-by-case basis for electric vehicle manufacturers who are wishing to build factories and charging stations in India.
It will also increase the demand for EV vehicles and it would be a win-win for both Indian and foreign manufactures.
In 2016, Tesla had already declared that “they would like to set up a network of supercharging stations all over India”.
Tesla has already done this kind of thing in several countries where they are operating. And also these supercharging stations would be designed by Tesla for not only their EVs but also other companies’ EVs.
But you are thinking that the government will be allowing non-Indian competition into the EV market but this would also give an impetus to the demand of electric vehicles and also to accelerate the growth of EV market.
If India wants to overtake China and the United States in manufacturing electric vehicles, they have to gear up and take some initiatives to dominate the global EV market.
5.2 Providing Energy Solutions
Tesla doesn’t make just cars, tequila and short shorts; they also make solar panels and huge storage batteries for houses, businesses, and cities.
And in India, consistent source of energy doesn’t really exist and for a majority of the country’s population, there are daily power cuts. In fact, it is just a way of life.
According to the World Bank’s report, India lost an estimated 86 billion dollars (4 % of the country’s GDP) due to the power sector’s distortions in fiscal year 2016.
So Tesla can offer energy solutions to Indians through Tesla energy. This could be a great opportunity for Tesla because the demand for a consistent source of electricity is much higher than EV market.
5.3 CyberBikes or CyberAutos
The third option for Tesla is Cyber Bikes and Cyber Autos. For example, If Tesla entered the India Market, would be worth it?
In fact, in most Indian cities, there isn’t enough room for luxury cars and mostly people can’t afford it anyways. That’s why there are only 30.5 million cars in India and upwards of 187 million two wheelers.
And also 1.52 lakh electric two wheelers and 90 thousand e-rickshaws were sold, compare to 3400 electric cars in FY2020.
Because in India, people don’t really get around in cars; they loved to get around in autos, buses, scooters and mostly bikes.
Like in India, Tesla is currently owned by only four persons – Mukesh Ambani, Pooja Batra, Ritesh Deshmukh, and Prashant Ruia.
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So as we all know that the innovative and creative Tesla Company is changing the world through is EVs, and what if instead of cars, they launched Cyberbikes or Cyberautos.
Because India has a different market, the demand for electric cars is not yet established, but there is a lucrative opportunity in two-wheeler market.
So no matter what, Tesla would be hitting the Indian streets in 2021 or 2022 and it will be interesting to see how Tesla will approach the Indian EV market.
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