reduced-import-duty-won-t-make-tesla-affordable-in-india

Tesla’s much-anticipated entry into the Indian market is unlikely to disrupt the country’s electric vehicle (EV) sector significantly, as even with reduced import duties, its cheapest offering will be priced between Rs 35-40 lakh, according to a report by CLSA, a global capital market company.

 

The report noted that Tesla’s base Model 3, priced at approximately USD 35,000 (Rs 30.4 lakh) in the United States, will incur additional costs, including road tax, insurance, and other levies. Even if India lowers import duties to 15-20 per cent, the on-road price would still be around USD 40,000, translating to Rs 35-40 lakh.

 

“The cheapest Model 3 for Tesla in the US is c.USD35k. With tariff lowered to c.15-20 per cent in India, along with road tax, insurance and other costs, on-road price would be c.USD40k, which is close to Rs3.5-4m,” the CLSA report stated.

Limited impact on the EV market

Tesla's potential pricing strategy may not significantly affect India's domestic EV manufacturers, as its models could be positioned 20-50 per cent higher than locally produced EVs such as the Mahindra XEV 9e, Hyundai e-Creta, and Maruti Suzuki e-Vitara, the report suggested.

 

Even if Tesla introduces a lower-priced entry-level model below Rs 25 lakh, CLSA believes its impact on existing manufacturers would remain limited. The recent decline in Mahindra & Mahindra’s stock, the report noted, already factors in Tesla’s potential entry.

 

The report further underscored that EV adoption in India remains considerably lower than in global markets such as China, Europe, and the United States, reducing the likelihood of a major shift in consumer preference.

Meanwhile, U.S. President Donald Trump has condemned Tesla’s plan to establish a manufacturing facility in India, describing it as “very unfair” to the United States.

Tesla begins hiring in India

 

Tesla Inc. has taken a definitive step towards launching its operations in India.

 

On 18 February, the EV giant posted a job listing on LinkedIn for a Consumer Engagement Manager position in the Mumbai Metropolitan Region, signalling its intention to commence business activities soon.

 

 

The company is expected to introduce its models initially in Delhi and Mumbai before expanding to other cities.

Local manufacturing essential for affordability

The CLSA report pointed out that Tesla would need to establish a manufacturing unit in India to make its vehicles competitively priced.

 

Under India’s EV policy, the company could benefit from a concessional import duty of 15 per cent on up to 8,000 units annually if it commits to investing over Rs 4,150 crore in local production facilities.

 

Comparing Tesla’s potential market challenge to the Indian motorcycle industry, the report highlighted that Harley-Davidson’s X440, priced 20 per cent higher than the Royal Enfield Classic 350, sells only around 1,500 units per month, while the Classic 350 sees monthly sales of approximately 28,000 units.

 

This, CLSA argues, demonstrates the high price sensitivity of Indian consumers.

Tesla’s market prospects

Tesla’s success in India will hinge on its willingness to make substantial investments in local manufacturing. Without such commitments, the high cost of its vehicles, even with reduced import duties, is expected to limit its market penetration.

 

For now, Indian consumers looking for affordable electric vehicles may find domestic offerings more attractive, while Tesla’s high-end models could cater primarily to a niche segment of affluent buyers.