Why Tesla needs to enter India

A series of tweets by Elon Musk over the months have excited as well as disappointed fans over the entry of Tesla in India. Let’s take a look at why Tesla needs to enter the Indian market

Tesla is an American automobile manufacturer known for its electric-powered vehicles. The company is also known for power backup systems for homes and businesses. The whole excitement over Tesla’s entry began when Elon Musk replying to a tweet, about a question over Tesla’s India entry, Musk said, “Hoping for summer this year.”

Later, Elon Musk tweeted that the roadblock to entering the country was India’s sourcing requirements. However, the Government responded with the “Make in India” twitter account quickly clarifying that the country’s foreign direct investment (FDI) policy does not mandate manufacturers to comply with any minimum local component sourcing norm.

Elon’s Tweet on 2nd June 2017 “India commits to sell only electric cars by 2030. It is already the largest market for solar”, drew instant response even from Anand Mahindra, executive chairman of Mahindra & Mahindra group. He replied by tweeting with a challenge “Time you got out here Elon. You don’t want to leave that whole market to Mahindra do you? The more the merrier — and greener.” According to his latest tweet, Tesla is in discussion with the Indian Government about temporary relief from import penalties/restrictions for Tesla until a local factory is built.

There is still no clarity on whether Tesla is planning to enter the Indian market with cars or battery packs. If Tesla plans to enter the highly competitive Indian market, they have to ensure that customers will have access to service support and charging infrastructure to the last mile. They will also have to tackle issues with pricey import duty on vehicles from other countries. Many top companies including General Motors have failed on understanding the Indian automobile market and it’s imperative that Tesla does some ground work before investing in India.

Mahindra is the only automobile manufacturer in India producing electric cars and has managed to sell only 1,100 electric cars last year. They currently manufactures 2,000 electric cars a year and targets 5,000 units by 2018. Thus, there is a substantial need for high demand for electric cars in India and Tesla should be prepared for it. By 2030, India plans to sell only electric cars. With Air pollution a major problem in all Indian cities, people will eventually shift to electric vehicles but the transition is expected to take time.

Tesla had a disappointing run in China when it entered the market in 2014 and the company will hope not to repeat the mistakes in India. It’s unlikely that Tesla produces cars in India any time soon, but Tesla has a huge opportunity in India to build a Gigafactory that can produce lithium-ion batteries for PowerWall and cars. With the government making huge bets on solar energy – India is committed to increase the amount of electric power from clean energy resources to 40% by 2030, Tesla’s PowerWall might find its success in India. There is a huge demand in India to store energy generated from Solar panels and Tesla’s PowerWalls will have the capability to store energy that can power an entire village.

It’s also an opportunity of Tesla to build their network of SuperChargers in the country, before selling cars. The future of solar power and electric vehicles (EV) in India are closely interdependent and Tesla must be ready to make its way to make in India.

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