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Tesla’s India Fans Are Eager To Buy Elon Musk’s Cars, But Politics Is Getting In The Way

Nov 4, 2021

AFP PHOTO/Roberto SCHMIDT/Patrick Pleul/dpa-Zentralbild/Getty ImagesGetty Images. Design by Forbes W hen Tesla opened pre-orders for its Model 3 electric sedan in India in 2016, Arun Bhat, a businessman in the southern city of Bengaluru and an ardent Elon Musk fan, was among the first in the country to pre-book his dream car. Bhat even got rid of four luxury vehicles to make  space for it. “I thought Tesla would launch in India in the next couple years,” Bhat says. “I just love the product and the minimalist interior.” Five years later, his wait continues. The world’s most valuable automaker, with a market cap now topping $1 trillion that makes Musk the richest person in history, is at a high point, both in profit and global sales this year. The company has a shot at delivering a record 1 million electric vehicles worldwide in 2021. Yet after years of floating the idea of selling Teslas in India, Musk has yet to figure out how to do that, even as his focus on the market intensifies. In recent weeks the company has stepped up its push, led by the company’s local policy chief, Manuj Khurana , to get a waiver of steep import fees that would almost double the price of imported Teslas. Instead, the Modi government wants Tesla to commit to local production. India's Ministry of Road Transport and Highways approved four Tesla variants for local sale earlier this year. And although Tesla has yet to announce a formal plan for India, it’s already secured retail space in Mumbai, registered an office in Bengaluru and is making key hires to support sales in the country. For now, things are at an impasse. Setting up local manufacturing would take at least a year and a hefty investment from Tesla, and starting with sales of imported vehicles is a non-starter without a tariff waiver. India’s “import duties are the highest in the world by far of any large country!” Musk told a local fan on Twitter in July. Without waiver relief, India’s import tariff means that a Tesla Model 3, which starts at about $44,000 in the U.S. would have to sell for about $80,000 in India for the company to turn a profit, according to local estimates . “India’s import duties are the highest in the world by far of any large country!” —Elon Musk via Twitter But that’s not the only hurdle. There’s limited electric vehicle charging infrastructure, a lack of significant incentives for electric car buyers and India’s road infrastructure presents challenges. Despite a massive population of 2.2 billion people, India is also a relatively small auto market, with sales of fewer than 3.5 million passenger and commercial autos in 2020 . There’s even less demand for both EVs and luxury autos. Only about 5,000 battery-powered vehicles were purchased in India last year, such as those made by Bangalore-based Mahindra Electric, accounting for less than 0.5% of total sales. “It’s like what they used to say about China: ‘a billion people without money is not a market,’” says Michael Dunne, a long-time analyst and advisor on the auto industry in Asia who runs San Diego-based consultancy Zozo Go . “That's kind of where we are with India. You have an active concentration of wealth and then everybody else who's just scraping by. The median average price of a new car sold in India is going to be less than $10,000—a lot less than a Tesla.” So why bother? Tesla is growing quickly throughout the world, expanding production and sales in China, awaiting German government permission to start building electric vehicles at its Giga Berlin plant and preparing to make Teslas in Austin, Texas. India, although it’s the world’s second-most populous country, isn’t a particularly attractive market today, but it has a growing, tech-savvy middle class. And like China, its consumer market has massive long-term potential. India’s government is also starting to take steps to encourage EV sales to curb toxic emissions, offering buyers enticements including lower registration fees and road taxes—though it isn’t offering the kinds of incentives seen in the U.S. and Europe that can knock thousands of dollars off the purchase price. Geopolitical tension between India and China is a further complication as Tesla lobbies the Modi government for tariff relief. Road and Transportation Minister Nitin Gadkari has warned the carmaker against shipping vehicles built at its Shanghai plant for sale in India, telling Musk to build locally. “You should manufacture electric cars in India and also export cars from India,” he said in media interviews this month. If Musk agrees to do that, Gadkari said he assured the CEO that Tesla will receive significant government support. Mercurial billionaire Musk has teased the possibility of Indian production—as an enticement for a tariff waiver. “If Tesla is able to succeed with imported vehicles, then a factory in India is quite likely,” Musk tweeted in July . But the Modi government hasn’t bent in its demand for the company to commit to local production before it considers a waiver or subsidies. Tesla didn’t respond to email inquiries on the matter, and Tesla executives didn’t provide an update on the company’s plans for the country during its quarterly earnings call in October. “You (Musk) should manufacture electric cars in India and also export cars from India”. –Nitin Gadkari, India’s Road and Transportation Minister India would be a compelling base to build vehicles for other markets Musk has yet to enter, including much of Southeast Asia, Africa, Latin America, Australia and New Zealand, says Dunne of Zozo Go. Tesla may want to follow the path of Hyundai Motor, which has turned its Indian operations into a massive source of exports, shipping more than a 1 million cars and crossovers to 88 international markets during its last fiscal year. In the years to come an Indian export base could also become “a counterbalance or counterweight to all the eggs (Musk) currently has placed in China,” Dunne says. Despite some eager local fans, auto analyst Bakar Sadik Agwan with GlobalData in Hyderabad, India, sees significant local hurdles for Tesla. Notably, there are so few charging stations that using a Tesla to travel between cities will be impossible unless the company sets up its own network. “They will need a strong sales network, they need a service network and as well as they need their own charging infrastructure,” says Agwan. Pricing is also a big hurdle. In the U.S. the cheapest Tesla Model 3 starts at $40,000. Even if Musk gets a tariff waiver, that's too expensive for the vast majority of locals, putting Tesla in the luxury car bracket. In 2020 Indians bought just 30,000 luxury vehicles, Agwan says. As a result, Tesla might sell fewer than 150 cars in its first five years in India, according to Soumen Mandal, a Counterpoint Technology Market Research analyst in Gurugram, India. Local roads are yet another challenge. Many aren’t mapped on GPS and traffic in dense cities is often blocked—in some places by stray cattle and dogs . Tesla’s Autopilot feature “where you just plug in the address from point A to point B won't work in India,” says Jay Shah, a businessman in Ahmedabad in western India who has also pre-booked his Tesla. “The roads are not marked, there are animals on the road, there are two-wheelers on the roads, so it is next to impossible.” Long-time Tesla fan Bhat is optimistic he’s close to finally getting his vehicle. (He’s now more interested in a Model Y compact SUV than the Model 3 he pre-ordered.) To ensure that Musk knows he’s got local support, Bhat created a Twitter page with fellow enthusiast Nikhil Chaudhary to “pester” their hero and share the latest on Tesla’s India plans. In 2020, when other fans asked Musk on Twitter whether there was progress on the local launch, the American CEO replied “next year for sure.” The phrase has become an inside joke between Bhat and Chaudhary. Even if Bhat has to pay a steep price for his Tesla, he says it will be worth it given the long-term fuel savings. But mainly he just really wants one. “We have everything figured out,” Bhat says. “Only the car is missing.”

Nikhil Chaudhary Investments

1 Investments

Nikhil Chaudhary has made 1 investments. Their latest investment was in MEngage Technologies as part of their Angel on October 10, 2019.

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Nikhil Chaudhary Investments Activity

investments chart

Date

Round

Company

Amount

New?

Co-Investors

Sources

10/1/2019

Angel

MEngage Technologies

$0.1M

Yes

2

Date

10/1/2019

Round

Angel

Company

MEngage Technologies

Amount

$0.1M

New?

Yes

Co-Investors

Sources

2

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