As Elon Musk sets to meet Prime Minister Modi, here is a look at what it could mean for India's EV space
Elon Musk's electric vehicle arm, Tesla, is clearly having a bitter year. The stock price of the luxury automobile company has lost almost 30 per cent of its value on NASDAQ since the inception of this year. And as for the AI venture, Musk is reportedly seeking funding in Silicon Valley. This might signify that there is nothing big in the space coming just yet.
However, recently, the clouds of despair and gloom seem to fade as the billionaire is expected to visit India to repeat the EV story seen in China, as the dragon country continues to face inflationary pressure.
Cannot afford to take away the 'Premium' tag?
During the last quarter, Tesla's revenue figure witnessed a slight upgrade to $25.17 billion, up by more than 3 per cent, as compared to last year. But profit margins took a downturn by almost 6.2 percentage points. This was largely owing to 'price cuts' adopted by the firm to lift demand.
As the automobile company is set to announce its latest quarterly figures this month, the street doesn't seem very optimistic. The 'price cut' strategy, quite evidently, didn't work out for Tesla, which is known for its luxury profile.
In any case, the automobile major cannot remove its 'premium' tag and this might make India a 'hope' at the end of the tunnel for the firm. Goldman Sachs' Affluent India report, released earlier this year, reported that the country's 'Affluent' class is set to reach 100 million in the coming three years.
In another report by a real estate consultant Knight Frank, the number of ultra-rich Indians will witness a surge of 50 per cent by 2028. There will be a sharp increase in the number of ultra-high net worth (UHNWIs) individuals as well, having a net worth of $30 million or more.
These numbers indicate that there will be a soaring demand for premium goods in the coming years, which might just work out for Tesla as the company cannot slash prices to make its balance sheet look good.
What Tesla's entry can mean for India...
The demand for automobiles has witnessed a surge in India. According to SIAM (Society of Indian Automobile Manufacturers), passenger vehicle wholesales reached a new record high in FY24. Notably, SUVs (Sports Utility Vehicles) saw a surge of more than 25.8 per cent. Most of the Tesla models are electric SUVs. The company currently has a lineup of 5 vehicle models, Model S, Model 3, Model X, Model Y, and Cybertruck. It also offers 'Semi truck' model, but their production is limited as of now.
The Tesla Model 3 is known for being one of the more affordable options, typically ranging between Rs 30-50 lakh (in USA). But purchasing it from India has been a bit costlier due to hefty import duties, which can sometimes go up to as high as 100 per cent.
Thankfully, earlier this year, the government decided to cut down these taxes to encourage foreign EV makers to venture into the country. Under the new EV policy, imported electric cars valued above $35,000 (around Rs. 30 lakh) will incur a 15 per cent import duty if manufacturers invest at least $500 million in local production.
For Tesla, this might present a robust opportunity to capitalize on the premium market while also reaching out to a broader range of consumers beyond the elite segment.
While the luxury car maker's entry might pose some challenges for domestic players, it is important to note that India's EV market is still at its initial stage. A young market can always afford high competition since the space gets a larger time frame to mature. So as much as Tesla might need India to increase its profit figures, the nation might also need the luxury automobile firm to bring in the top-level competition.