The meme community and electric vehicle enthusiasts were very much excited when Elon Musk announced that Tesla will be coming to India this year. The share price of every single company that was even remotely associated with the electric vehicle industry spiked and investors were optimistic about the automobile industry as a whole.
But some issues have not been addressed to answer this question: Can Tesla actually replicate its success in India?
The first major factor: Affordability. Though India is a well-populated country, it still lags in terms of car ownership. Only 22 out of every 1000 people actually own a car in India. In the financial year 2020, there were only 3.5 million passenger vehicle sales in India, compared to 25 million passenger vehicle sales in the neighboring country China. Of that 3.5 million, 80% of them are priced less than $12000 or 8,71,392 rupees (it’s safe to be accurate).
Clearly, we can see that India is a very cost-conscious country in which even major global carmakers like Ford and Volkswagen have struggled to make an impact. The domestic giant, Maruti Suzuki holds around 50% market share followed by Hyundai.
So which mode of transportation is actually dominant in India? Two-wheelers! India has recorded around 21.3 million two-wheeler sales in the financial year 2020. Why? Because two-wheelers are still the most affordable mode of transportation for the Indian middle class.
The second major factor: Technology and Infrastructure. India is not really ready for the Electric Vehicle market yet, and infrastructure is the best example for it. India does not have adequate charging stations to power electric cars and is just starting in it. Most of India’s power grids are still coal-powered, so in monsoon seasons charging your electric cars can be a bit tricky.
Like autopilot and auto lane changing, Tesla’s flagship tech may not work in India due to traffic and inconsistent driving lanes. One of the major selling points of Tesla is quite redundant in the country. Tesla’s major competition in the country is not sophisticated electric cars, but cheaply priced gas-powered cars.
Tesla has a loyal following in the country but converting it into sales numbers is a question. Indian automakers like Tata Motors and Mahindra & Mahindra have already launched their own electric vehicles and Maruti Suzuki has also planned to enter the market in near future. Penetrating this cost-conscious market with luxury electric vehicles is extremely difficult.
Well, I have stated all the negative points, I should also provide the possible solutions, right? Can Tesla solve these issues and survive in India? There are three options for the EV giant:
First, Tesla should consider India as a manufacturing hub for their electric vehicles rather than trying to sell them here. India may not be ready to purchase electric cars, but India is very much ready to manufacture them. Tesla can use this to its advantage by manufacturing its electric cars in India and export to other Asian countries. Union Minister on India has also said that India can become the largest manufacturer of electric cars in the world, Musk should use it to his full potential.
Second, Tesla can wait it out. They have just registered themselves in India, but need not start selling or producing cars immediately. They can do what they initially signed up for; research and development. Slowly after establishing their brand in India and as the EV industry grows, Tesla can make their entry. They can set up an office and monitor the EV market in India. Other local players have started entering the industry, so Tesla can analyze the response of the Indian market and try to penetrate it slowly. Not every time you get a first-mover advantage.
Last but not least, a partnership with the government! One of the main reasons why Tesla succeeded in China is because of their partnership with the Chinese government. If the Indian government becomes best friends with Tesla and decides to support them aggressively, it can help them penetrate easily. This is a two-side love story though, to be stable in China Tesla reduced its price almost 3 times to get a subsidy. So only if both of them cooperate it can be a success story, you know, like a normal relationship.
All of us would love to watch Elon Musk succeed in India and post memes about it on Twitter, but we just have to wait some time for that to happen. Till then Elon can boost dogecoin maybe?
Source: A CNBC video that I had to watch multiple times.
