Long way for Tesla to India with infrastructure, supply chain problems

NEW DELHI (Reuters) – Tesla Inc is gearing up for a launch in India, but the US electric automaker will likely remain a niche player for years, targeting only the rich and well-heeled in the world’s second most populous nation.

India’s nascent electric vehicle (EV) market accounted for just 5,000 out of a total of 2.4 million cars sold in the country last year. A lack of local manufacturing of components and batteries, negligible charging infrastructure and the high cost of electric vehicles mean there have been few buyers in the price-conscious market.

It’s also hard to see how Tesla’s sought-after and expensive self-driving features will work on India’s congested roads.

Ammar Master, a meteorologist at consultancy LMC Automotive, said he expects Tesla to sell only 50-100 of its Model 3 electric sedans annually in India, at least in the first five years.

“As a country, India is not yet so environmentally conscious that it pays so much of a premium,” said Master.

“It always depends on the price. There will be some high net worth individuals like movie stars and senior corporate executives who will look at it for brand value. So how many buyers are there? “

The world’s most valuable automaker registered a local company in India earlier this month, a step towards its entry into the country, scheduled for mid-2021.

Tesla plans to import and sell the Model 3 in India for around $ 65,000- $ 75,000, roughly double the price in the US market, sources familiar with the plans said.

This means it will compete in India’s even smaller luxury electric vehicle segment which has recently begun to see interest from the likes of Jaguar Land Rover (JLR) and Mercedes Benz from Daimler.

The Mercedes Benz EQC, India’s first luxury electric vehicle launched in October for $ 136,000, and has since sold 31 units, according to automotive researcher JATO Dynamics. British luxury car brand JLR, owned by India Tata Motors, plans to launch its I-PACE EV before March. It sells in the United States for around $ 70,000.

Although India’s road infrastructure has improved in recent years, traffic discipline, such as lane driving, is still rudimentary. Automotive analysts say this means that many of Tesla’s features such as the automatic lane change function will be difficult to implement on busy Indian roads.

Stray animals, including cattle, and potholes in the road are an additional problem.

“Most of Tesla’s high-tech features will be redundant and users won’t get a bang for the dollar despite paying high prices,” said Ravi Bhatia, president of JATO Dynamics India.

LOCAL PRODUCTION

Rohan Patel, a senior public policy executive at Tesla in the United States, is among those leading the efforts around its launch in India, sources familiar with the plans said. The electric vehicle giant is looking to hire 15-20 people primarily for sales and marketing, a source said.

Tesla and Patel did not respond to a request for comment.

India has some of the most polluted cities in the world and wants cleaner cars on its streets, but the federal government still doesn’t have a global policy like China that requires automakers to invest in the segment.

One reason is that auto makers have rejected it saying there is no demand for electric vehicles in India as the costs of components such as batteries remain high and drive prices up.

And Tesla CEO Elon Musk himself has expressed concern about India’s high import taxes on cars.

Unlike India, China sold 1.25 million new-energy passenger vehicles, including electric vehicles, in 2020, out of a total of 20 million sales.

Tesla is a major player in China, accounting for more than a third of the automaker’s global sales last year, according to JATO Dynamics, and where it also has a factory.

Daniel Ives of US-based Wedbush Securities said however that within 7-8 years, India could account for 5% of Tesla’s total sales. The key to success, however, will be local production, he said.

“It’s a question of when, not if, they will build a factory in India,” Ives said, adding that building a local supply chain will be a multi-year effort.

“India is a potential weakness and Tesla doesn’t want to be late to the game.”

Reportage by Aditi Shah and Aditya Kalra; Editing by Raju Gopalakrishnan