Tesla’s road to India won’t be easy. The Elon Musk-led electric vehicle (EV) giant has sparked fresh speculation about its entry into the country through a series of new recruitments. But scaling up in the Indian market will require much more than just setting up shop—it hinges on local manufacturing and a competitive pricing strategy, according to a note by CLSA.
The brokerage firm pointed out that the price gap between Tesla’s global offerings and the Indian market remains a critical barrier. The average selling price of cars in India stands at $14,000 (Rs 12.13 lakh), while Tesla’s most affordable model in the U.S. is priced at $35,000 (Rs 30.3 lakh).
To make inroads, Tesla would need to price its vehicles at less than Rs 25-30 lakh, CLSA noted.
Adding to the complexity, India’s EV penetration is estimated at just 2.4%, significantly lower than Tesla’s key markets—30% in China and 9.5% in the U.S. The Indian market’s relative underdevelopment presents both a challenge and an opportunity for Tesla, should it successfully address affordability and localization concerns.
A major roadblock is India’s steep import duties. Vehicles priced under $40,000 attract a 60% duty, while those above $40,000 face a 110% duty, including agricultural cess. Even if these duties are reduced to sub-20% levels, Tesla would still need to establish local manufacturing to make its cars viable.
“We believe Tesla would need to establish manufacturing in India to scale up with its current portfolio and price its vehicles at less than Rs 3.5-4 million (Rs 35-40 lakh) on-road,” CLSA stated.
Despite the buzz around Tesla’s entry, CLSA does not anticipate a major disruption to India’s leading automakers. Maruti Suzuki India, Hyundai Motors India, and Tata Motors are unlikely to be significantly impacted, given the low EV penetration and Tesla’s expected pricing. If Tesla introduces the Model 3 at an on-road price 20-50% higher than upcoming domestic models like Mahindra XUV 9e, Hyundai e-Creta, and Maruti e-Vitara, its market impact will be limited, the brokerage noted.
Furthermore, Tesla’s push for a $25,000 (Rs 21.6 lakh) EV would require significant compromises on features and specifications. Indian automakers, which already offer competitive pricing with feature-rich models, are well-positioned to maintain their stronghold.
Even if the Indian government revises import duties to 15-20%, Tesla’s pricing would remain higher than most long-range electric SUVs from domestic players.