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Tesla’s Entry in India Seems to Make its Automotive Future More Electric
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The EV industry in India is still growing. The initiatives of central and state governments to boost EV in the country are already in place. While India is offering a massive opportunity for the EV ecosystem, there are still several challenges that it needs to overcome. There are hopes that Tesla's official entry could change the nascent EV segment's future.

Tesla, a brand which was recently hailed as one of the globe’s most valuable car company. Previously, there were rumors that Tesla is looking to scoop stakes in one of the big car companies from Germany. While there is no development on that yet, we are here to confirm that Tesla’s entry into India is finally becoming a reality. 

Elon Musk, the boss of Tesla (1), had confirmed a few months back that they are looking to enter the Indian market in 2021. You are almost forgiven if you are dismissing his confirmation because of overenthusiasm. He had confirmed on several occasions regarding his intention to start selling India. But, it never came to fruition. We are now more positive with its entry since Nitin Gadkari, the minister of Micro, Small and Medium business (2), confirmed that Tesla India operations would start in 2021.

According to reports, the company will open bookings from January 2021, and the sales will begin in June. It is most likely that Tesla will start its operations with the Model 3 and only online. It would mean lesser investment in the form of setting up the dealership and hiring a workforce. However, there is no clarity regarding when and where the deliveries would happen (3). 

Tesla’s Model 3 is a sedan, and the company claims that it has a 0-100 mph time of 3.1s and a range of 500km+. Since it has made huge investments in its Shanghai plant and Model 3 is made there; the cars will come directly from China. Since it’s a CBU, completely built unit, it could be priced above 50 lakh INR, ex-showroom (4).

After the Tesla Model 3, the American car company could be looking at bringing its Cybertruck. It is one of the most advanced electric trucks in the world (5). It offers the standard adaptive air suspension and more than 5,000 kg towing capacity. The company also claims that it’s range is slightly less than 500 km.

The model S is a BMW 5 Series competitor in terms of pricing and space. But, the claimed range with the model is a shade under 650 km. Tesla also offers more desirable models such as Model X, Model Y, and Roadster. These are most likely to come into the Indian market at a later date.

At present, Indian EV marketing is looking very bright. Customers are taking a liking to electric cars of MG India in the form of ZS and Hyundai’s Kona. India also has the lower-priced but highly versatile Tata Nexon EV. While Mercedes-Benz is already selling its EQC SUV in India, Mahindra is also ready with its electric SUV. Jaguar has also lined up with its i-Pace SUV for a lanch in 2021. Simultaneously, Maruti Suzuki and Toyota, and Ford and Mahindra are also working on their electric cars (6). 

Several buildings have already incorporated electric charges in parking lots in their blueprints. Malls and public parking spots have also started to get these in place. India already has charging stations on highways and petrol pumps. Most of these charging spots, as a public initiative, offer zero cost for recharging vehicle batteries. 

Another innovative approach is battery swapping. One can put a depleted battery for charging and replace it with another with a full charge. 

Since India has the requirement that there should be at least a 30% local supplier base, it could be one of the possible reasons why Tesla couldn’t previously enter India. It is worth highlighting that a local supplier would help generate more income for Indian vendors and encourage the Make in India operations. 

While we can’t wait to get the first Tesla car in India, let’s look at the growing Indian EV market. 

Indian EV Market Overview

The global EV market is growing at an exponential rate. According to the findings of BloombergNEF on EV, by 2022, there will be more than 500 different EV models available worldwide. There is also a significant jump in EV sales today than in the previous decade (7). 

Notably, in India, Government subsidies and schemes play a major role in the growth of the EV market. Additionally, the growing environmental concerns because of the high pollution levels in the major Indian cities are also positively affecting its growth (8). 

According to an analysis by BIS Research (9), the Indian EV market is expected to grow at a robust CAGR of 43.13% from 2019 to 2030. Moreover, the installation of charging infrastructure is also estimated to grow at 42.38%. 

The electric vehicle battery market is also projected to grow at a whopping 60.15% CAGR with the entry of local battery manufacturers like TATA Chemicals and BHEL and the import of batteries from international players. 

Notably, the Indian EV ecosystem market is in a nascent phase at present. Even though the Indian automotive industry witnessed a sharp decline in 2019, it is expected to expand in the upcoming years. 

“The government target for 30% adoption of electric vehicles by 2030 will be majorly driven by the electrification of two-wheeler, three-wheeler, and commercial vehicles. Lower rate of adoption of electric vehicles in the passenger vehicle segment is expected to have a limited impact in achieving the targets.” 

– BIS Research (10).

 

The Driving Force and Restraints

Numerous factors are playing a key role in riping the Indian EV market growth in the near future. It includes consumer and producer attitudes and the underlying regulatory and physical structure driving the country’s rapid electrification. 

Despite the rising disposable income reserves, the cost of mobility is still considered for middle-class consumers. According to the Kearney report (11), they consider coverage, energy-efficiency, and comfort as their top priority. And these priorities are finely fitting with the electrification plan. 

“Urban consumers are expected to drive penetration in the early phase of adoption. Electric cars geared toward young, environmentally conscious buyers will accelerate adoption.”

– Manish Mathur, Partner at Kearney (12). 

If we keep the obvious environmental benefits aside, Indian consumers are also lured towards EV because of the falling costs. The report also shows that the TCO, Total Cost of Ownership, of an EV is far lower than a petrol or diesel car considering the high fuel prices. It is a new phenomenon, and since the initial cost of getting an EV is among the biggest obstacles to its adoption, it is likely to push the adoption over the obstruction. 

But while demand is in place, the supply has been slow. High equipment costs and overall lack of infrastructure have discouraged manufacturers from giving EVs the center production stage. There are also other significant challenges beyond the cost strain. 

“Although the market for personal vehicles is large and has significant potential, wider adoption faces several challenges, such as lack of comparable product options, range anxiety, and lack of experience with EVs. Home charging will continue to dominate, but this could be challenging since many Indian households do not have garages. Even in high-rise apartments, setting up infrastructure can be a difficult task. There is also a lack of highway charging infrastructure, restricting use to intracity travel.”

– Rahul Mishra, Principal at Kearney (13).

Even though these barriers have weighed the EV progress in India, the government has been actively involved in developing the regulatory framework and infrastructure needed to get close to the electrification targets (replacing all internal combustion engines with EVs by 2030). 

However, a McKinsey report (14) from 2017 indicates that 40% electrification is a more realistic picture for mobility in 2030. Another report from Arthur D. Little (15) from 2018 indicated that 2020 could be a tipping point that could lead to an electrification boom in India. 

Previously, there were also concerns about India’s power supply capacity and whether it could meet the demand for electrification. But there are reports that India has already bridged the demand supply-gap in the past two to three years and is also looking to install another 300 gigawatts capacity by 2030.

Even from a regulatory perspective, initiatives such as the National Electric Mobility Mission Plan launched earlier in 2020 have paved the way for subsidies and incentives to push manufacturers towards EVs. Several of India’s largest states also have realized schemes at the local level to expedite production.  

The pressing issue for the adaptation is the charging infrastructure, which needs large capital investment with slow returns. Members of the EV ecosystem explore several business models like public and private partnerships, state-run aggregators, and others to tackle this issue head-on (16). 

 

Opportunities

According to an independent study by CEEW Centre for Energy Finance (17), India’s EV market could be worth 206 billion USD or 14,42,000 crore in a decade if it could achieve its 2030 ambitions. It has also estimated a cumulative investment requirement of 180 billion USD in vehicle production and charging infrastructure until 2030. 

The study also suggests that EV sales in all vehicle segments could cross 100 million units by 2030. It is 200 times its current market size since at the end of March 2020, the total number of registered EVs in the country stood at only half a million. 

“Availability and affordability of capital for OEMs, battery manufacturers, charge point operators, and end consumers would be key to determining the pace, efficiency, and cost of India’s transition to electric vehicles. Consistent policy support would also be critical. The recent announcements by the government to set up EV kiosks across 69,000 petrol stations in the country and permit sales and registration of EVs without batteries can give a boost to the sector”

– Vaibhav Pratap Singh, Senior Analyst at CEEW-CEF (18). 

According to estimates, India’s EV ambition would need an estimated annual battery capacity of 158 GWh by 2030. It presents a massive market opportunity for local manufacturers. Even if only half of the battery manufacturing capacity is indigenous, the investment will amount to 6.1 billion USD or 42,900 crores INR by 2030.

Moreover, the cumulative investment needed would increase over 12.3 billion or 85,900 crore INR if India achieves 100% indigenization of battery manufacturing. The recently approved PLI, production-linked incentive, scheme for automobile and battery manufacturing sectors could help enable the right ecosystem for job creation and indigestion in the EV sector.

There are also suggestions that the country would need a network of more than 2.9 million public charging points by 2030 and beyond the in-home charging points. It could also build another massive market opportunity needing cumulative investments of about 2.9 billion USD or 20,600 crores INR by 2030 (19). 

 

Take Away

There seems to be an increased requirement to prepare for a green future in Indian mobility. Nevertheless, India offers massive opportunities for companies in the EV ecosystem. India’s public transportation requirements could lead to the major push towards EV. 

The Indian EV market is still in developmental stages, and firms could identify and position themselves to meet the growing market in the long run. 

Conclusively, the wave of EV penetration in India would depend on finding the right applications and segments, designing the right product, shaping an appropriate business model and value proposition. 

Tesla’s entry has only made the EV segment in India more exciting!

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Rucha Joshi is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student. She's currently working as a content writer and is always interested in a challenge.

Disclaimer: The views, thoughts, and opinions expressed in the article have been curated for our audience and does not warrant a 100% accuracy. All the information mentioned in the article is subject to change according to the changing viewpoints. Feel free to reach us at [email protected] for any change or copyright issues.

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Rucha Joshi
Rucha Joshi
Rucha Joshi is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student. She's currently working as a content writer and is always interested in a challenge.

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