Tesla Faces Bumpier Ride Breaking Into India After China Success

Bloomberg Quicktake: Now published this video item, entitled “Tesla Faces Bumpier Ride Breaking Into India After China Success” – below is their description.

Elon Musk all but confirmed Tesla will enter India, sparking jubilation among fans, some of whom have had electric cars on order for years. But it may prove the company’s hardest market to crack yet.

Musk on Jan. 13 tweeted “as promised” in response to a report on a Tesla-focused blog that the automaker was in talks with several Indian states to open an office, showrooms, a research and development center — and possibly a factory.

Arun Bhat, 34, a company director in Bengaluru, the city formerly known as Bangalore, was similarly overjoyed, saying that at last there’s a possibility he’ll be able to get behind the wheel of the Tesla Model 3 he ordered in 2016.

For all the hype, Tesla’s foray into India is far from a done deal. The company is in discussions with state officials but is yet to decide on an Indian base, according to the Tesmanian blog post that triggered Musk’s response, which came after months of unsubstantiated speculation in local media. A Tesla representative in Beijing declined to comment.

Although India is Asia’s third-biggest economy and home to a budding middle class, it hasn’t rolled out the welcome mat for EVs, unlike neighbor China, where Tesla set up its first factory outside of the U.S. and now dominates electric-car sales.

EVs account for about 5% of China’s annual car sales, according to BloombergNEF, compared to less than 1% in India. And most market watchers expect China to power ahead of other countries when it comes to EVs in the near term, thanks to generous government subsidies, a hankering for greener vehicles among the nation’s young, upwardly mobile population and solid charging network.

According to the International Energy Agency, around 60% of the world’s public slow- and fast-charging spots are in China. As Chinese carmakers roll out competitive EV models and develop a diverse ecosystem, the country is “heading toward disrupting the current global auto industry landscape,” UBS Group AG analysts wrote in a report last month.

In 2015, it launched a Faster Adoption and Manufacturing of Hybrid and EV (FAME) plan, with a 9 billion rupee ($123 million) commitment to subsidies that cover everything from electric tricycles to buses, according to the IEA. A second generation of the FAME program introduced in 2019 was larger, with 100 billion rupees to encourage EV purchases and build out charging infrastructure.

India also cut the goods and services tax on EVs to 5% from 12%, effective August 2019, much lower than the levies of as much as 28% slapped on other motor vehicles, which have attracted criticism from companies like Toyota Motor Corp.

But contrast that to China, where utility State Grid Corp. of China committed to spending 2.7 billion yuan ($416 million) on charging stations in 2020 alone. In another sign of China’s much-larger commitment, state-owned China Southern Power Grid Co. said it planned to invest 25.1 billion yuan on charging infrastructure over four years. Those outlays come after several years of heavily subsidizing consumer EV purchases to kick start the market.

Cost will also be a major stumbling block.

India’s FAME programs won’t do much to help lower the price for would-be Tesla customers, since the upper limit for an EV to qualify for subsidies is 1.5 million rupees. Teslas will cost more than that and therefore won’t be eligible, according to BNEF analyst Allen Tom Abraham.

An entry-level China-built Tesla Model 3 starts at 265,740 yuan, or around $40,960, while the Model Y sports-utility vehicle crossover out of Shanghai, which can run for almost 600 kilometers (373 miles) on one charge, costs from 339,900 yuan. With export expenses on top of that, the sticker on a Tesla retailed in India would put it beyond the reach of most drivers.

About 75% of all Indian auto sales occur in the $10,000 and under bracket, about half the average price in China and just 25% of the average in the U.S. That means even Tesla’s most affordable car will likely appeal to only about 1% of the market, Singapore-based Abraham said. “The volumes they can expect in a market like India will be really, really small,” he said.

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In This Story: India

India, officially the Republic of India, is a country in South Asia. It is the second-most populous country, the seventh-largest country by land area, and the most populous democracy in the world. New Delhi is the capital.

It has an exceptionally diverse population, with Hindus, Muslims, Christians, Sikhs, Buddhists, Jains and other religions speaking over 21 recognised languages.

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