Tesla eyes India market for affordable EV, likely to set up distribution network

US electric carmaker Tesla is exploring potential to bring an affordable car to the Indian market. This was revealed by Jayaprakash Vijayan, chief information officer of Tesla Motors, who was recently in New Delhi to evaluate business opportunities for the green carmaker to make a foray into India.

Riding the crest of the wave of success of the Model S premium sedan, which brings credibility, luxury and useful range fo the electric car market, and has outsold the Audi A8, BMW 7 series and the Jaguar XJ in the US, Tesla drove into China last year. It is now actively looking at entering emerging markets like South America, besides China and India in Asia with its new affordable mass market electric car, the Model 3.

To hit the US and global markets within three years once Tesla’s Giga factory in Nevada, USA, goes on stream, the Model 3 will be priced between $30,000-40,000 (Rs 18.42 lakh – Rs 24.56 lakh) which, according to Vijayan, is pretty reasonable in the US as it leads to significant savings compared to a conventionally fuelled car. The Model 3 mass market car, slated to have a top speed of 200kph, will on a single battery charge have a range of 350 kilometres. 

The new plant at Nevada will supply affordable lithium ion batteries for the Model 3 model as it is located in a lithium ion rich region.

In a exclusive interaction with Autocar Professional, Vijayan said that the Model S luxury car  (pictured above) generates high margins and these are being reinvested in R&D and would form the foundation for producing the mass electric affordable car. “We are in the final phase of the journey and the Giga factory is part of that journey. We wanted to produce affordable batteries because what is produced today is not very affordable and that is why electric cars are so expensive.”

Deterred by high taxes in India
Tesla, meanwhile, is keen to enter the India market but high import taxes are posing a barrier in bringing its electric cars to India. With Tesla set to launch a new electric SUV – Model X (pictured below) – by end-2015, it would have a larger stable of products to offer here. Hence Tesla is first looking at starting a distribution set up for its Model S premium sedan in India that costs around $70,000 (Rs 42.98 lakh) upwards in the US and can do 500km per charge. 

Thus far Tesla, which has one assembly location in the Netherlands and the main factory at Freemont in the US, has not been too keen to have a regional manufacturing or assembly set up but now with the planned launch of the affordable Model 3, a regional assembly or manufacturing location will be necessary. Since Asia with its large, potential volumes offers a huge growth prospect, Tesla will have to choose between setting up a plant either in China or India.

“We will enter the Indian market first and see the potential as there is a huge need for EVs due to the high  pollution levels. But in India there is no category for EVs and neither are there any tax exemptions given for electric cars. If the Central government reduces import tax significantly that is about 120 percent, and makes it different for EVs, Tesla can bring its products and inspiring innovative technology almost immediately. It will benefit the local automotive industry as well. We are ready to enter the India market.”

The location for the Indian facility will be based on local demand, potential skill sets and talent pool available in the region, the status of an auto hub and manufacturing design capabilities. Further, an Indian state which is ready to provide  discounts and subsidies will also be a leveller.

Tesla is looking at volumes of a few tens of thousands of its affordable car in India. When asked whether it will be as affordable in India as it is slated to be in the US, Vijayan says, “We are conducting more research to bring the price down to as low as possible and the goal is to have the car within three years.” Tesla is looking to repeat what it did in China in terms of pricing its products – it maintained the same price as in the US adding only the VAT and other taxes that China charges.