CIOInsider India Magazine

Recently, Tesla posted recruiting advertisements on LinkedIn for jobs in customer support, vehicle maintenance, sales, business operations, and marketing in Mumbai and New Delhi. Additionally, the US electric vehicle manufacturer is allegedly hunting for land, especially across the southern states to open retail locations by April this year. The latest developments have once again evoked much talking among the automotive community in the country.

While the Indian government and general public appear to cheer for Tesla’s arrival, neither US President Donald Trump nor market leaders have expressed favorable views to date. In light of the tariff discrepancies between the US and India, President Trump stated that it is not quite possible to sell Tesla cars in India.

Now, there are a lot of questions that pop up, starting with how Tesla's arrival would affect domestic automakers' manufacturing strategy. What are the obstacles that the company would need to overcome to have a significant retail presence in India? How could it benefit Indian consumers? How will Tesla’s presence impact the nation's EV pricing? What impact will Tesla's arrival have on governmental EV regulations? Whether Tesla has the answers to all that or more is what we will have to keep our ears peeled and, perhaps, take it with a grain of salt.

Which Route Does Tesla Plan to Take to Enter India?
Firstly, Tesla plans to likely have a $2–3 billion production facility with an annual capacity of 500,000 vehicles as a part of its entry plan. To win the appeal of Indian customers, the company is hoping to introduce an inexpensive variant that costs between Rs.20 and Rs.25 lakh.

Long-standing Barriers
However, regulatory and tariff-related obstacles have weighed down its attempts at reaching the entry point in the country. A major barrier towering over its goal has been the high taxes of 70–100 percent levied on fully constructed units (CBUs) imported into India, which happen to spike the prices of Tesla's vehicles. Another question that remains unanswered is whether Tesla can function without a robust network of superchargers.

While Tesla's job postings for India indicate that the company intends to build a robust customer support network there, the country's demand for premium EVs is still shockingly low, even though it is the third-largest automobile market in the world.

Although the market for premium EVs is increasing in India, Tesla's EV sales will still fall well short of the 8000-unit ceiling. Additionally, it is said that there has been no discussion about building a nationwide network of Superchargers, which is essential for all Tesla customers and a key factor in the company's success worldwide. Tesla would need to assist with the installation of "Superchargers," its exclusive line of rapid DC chargers, at least on India's major highway networks, if it hopes to speed up the country's EV adoption.

An Alternate Scenario
Take the Indian government's new EV policy, unveiled last year, which permits automakers to import 8,000 vehicles each year at a 15 percent import charge, given they invest at least $500 million in local production. If this policy goes through, it could most likely lower the cost of Tesla vehicles. But for now, word has it that Tesla's Berlin facility will first construct right-hand-drive Tesla Model Y vehicles for the Indian market until the route is clear for it to set up local production facilities in India. But keep in mind that the EV market is still booming in the country which leads to another possibility for the US EV automaker to not lose hope yet.

There is Still a Chance: Booming EV Market
With a projected CAGR of 34.5 percent between 2023–2030, Frost & Sullivan predicts that India's EV industry would grow rapidly. Another new report by the India Energy Storage Alliance says that India sold over 4.1 million EVs overall in FY 2023–2024 and is expected to have over 28 million EVs in use by 2030. Tesla, which saw a decline in sales last year following more than a decade of growth, could benefit from this opportunity.

Plus there is a good chance that EV sales could triple this year by factors like increasing demand, charging infrastructure expansion, and more manufacturers producing more affordable models. These factors could nurse back Tesla’s sales which has not been doing well in crucial markets like China and the US.

Additionally, the US EV automaker could also profit from India's push for renewable energy and growing demand for luxury cars. Again, reports suggest that the company might begin with imports before considering local manufacturing, depending on market demand and regulatory incentives.

How Will India Benefit from Tesla?
While market leaders might have to level up their game in the sector, Tesla's arrival could influence the pricing strategy and increase innovation across a range of vehicle segments. The cost of imported EVs would likely take the biggest slice of the pie this way. Other luxury manufacturers might have to change their pricing strategies in response to Tesla benefiting from lower import levies. Additionally, the Indian government might have to rewrite certain statements in its policy to promote the usage of EVs and help domestic manufacturers to better compete with international competitors.

Faster Electrification Process
The more EVs are accepted, the faster the electrification process could be made by both domestic and international automakers operating in the Indian market. As a bonus, Tesla's marketing and visibility may increase consumers’ awareness of the advantages of EVs, which will also help the government meet its 2030 electrification goals.

A Supply Chain Boost and Which Cities Could Impact
Tesla has begun searching for sites to establish an EV production facility in India, a day after the company unveiled its hiring ambitions for the nation and Maharashtra may be the project's first point of consideration. The state government of Maharashtra has suggested two locations, Chakan and Chikhali, which are close to Pune. Pune is already home to the automaker’s office. In 2023, Tesla India Motor & Energy Pvt Ltd leased a five-year office space at Pune's Panchshil Business Park.

Then, the ecosystem as a whole could start receiving benefits from Tesla's arrival into India. Currently, reports state that a number of vendors are on the lookout for sites in Tamil Nadu and Gujarat. Since Tesla's entrance will likely attract other European high-end component companies, the EV supply chain will get a boost from this.

Also, Tesla has to adhere to the regulatory framework that permits lower tax imports only if local manufacturers and 50 percent local component sourcing are promised. If it abides by local production, the US automaker could in turn facilitate more innovation and employment opportunities by expanding the domestic EV component supply chain. At the same time, the traditional dealership network in India might get affected by its direct-to-consumer sales strategy. It might force other automakers to reconsider their distribution plans if it becomes effective.

There is more to Tesla's foray into India's highly congested auto industry than just the introduction of another international automaker. Tesla has the potential to accelerate the nation's transition to EVs by bringing in cutting-edge technology, stepping up competition, and influencing policy reforms.