Automotive company Tesla is considered one of the pioneers in the electric vehicles (EVs) industry thanks to its innovative designs, tech, and marketing. This year, Tesla announced its plans to release anew modelof the compact EV, currently referred to as Model 2. Model 2 is expected to cost around $25,000 (approximately ₹20 lahk), making it one of the most affordable electric cars in the market.
Aside from its relatively lower cost compared to rival brands and previous Tesla models, there have been speculations about the design and features of Model 2. It is rumoured to be a high-riding hatchback with a range of over 200 miles, a longer battery life, increased fuel efficiency, and advanced technologies like Tesla’s self-driving system.
However, Model 2’s release has been delayed, dividing the opinions of investors and analysts on whether this will benefit or harm Tesla’s sales in the long run. Despite the lack of an official release date, it is clear that the development of Model 2 will impact India, considering Tesla’s recent push to enter the country’s current EV market.
Tesla’s push for EV production in India
Tesla’s efforts to break new ground in the Indian EV market officially started when the company registered its Indian arm, Tesla India Motors and Energy, in January 2021. By March, the Ministry of Road Transport and Highways offered the EV giant incentives to reduce production costs. The rest of the year saw Tesla lobbying for a reduction in import tax duties to make EVs more affordable in India. However, the Central Board of Indirect Taxes and Customs turned down this demand for tax breaks, effectively putting Tesla’s EV plans on hold throughout 2022.
It was only in May 2023 that Tesla renewed its push for Indian operations after a group of senior executives visited India and met with PM Modi and other federal government officials. Tesla discussed aninvestment proposal to set up an Indian factory and produce about 5 lakh EVs annually. Aside from sourcing components like batteries and manufacturing the models locally, the automaker also expressed interest in turning India into an export base for shipping cars to other countries in the Indo-Pacific region. Nonetheless, the government is firm in its decision not to give Tesla special treatment in terms of customs tariffs.
Possible gains in market share
Plans for high production capacity and the affordable price of the EV itself equip Tesla with the potential to capture significant market share. In 2023, retail sales of EVs in India were over 700,000 units, but these were largely driven by the electric two- and three-wheelers segment. Tesla’s entry can positively impact the sales of electric cars, which only accounted for 5.31% of total sales as of June 2023.
Interestingly, whether or not Tesla succeeds at boosting its market share in India also influences possible gains among Indian retail investors. In recent years, investors have been able to buy and sell stocks from large-cap companies like Tesla due to the increased accessibility ofstocks tradingon online platforms. Aside from low startup costs, an online trading platform guarantees low and stable spreads with zero commission even in a highly volatile stock market. Considering the fast-paced developments in Tesla’s plans, platform features like instant transactions and transparent pricing history also make it more likely for Indian stock traders to keep abreast of Tesla’s market movements for their dealings and investment strategies.
It is also worth noting that Tesla’s success in reopening dialogue channels with the government can be attributed to India’s growing push for its overall EV market. Beyond just one company, EV adoption levels in India are expected to see exponential growth in light of the government’s Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. The FAME scheme aims for increased penetration of electric cars, buses, commercial vehicles, and two- and three-wheelers by 2030, urging investors to consider the big picture when deciding to hold a stake in EV manufacturers like Tesla.