The scramble for Tesla

At one level, it is embarrassing to see the kind of posturing that India is resorting to in order to get Elon Musk’s attention. 

The CEO of Tesla Motors has been vocal for a while about the high import levies prevalent in the country’s auto industry. His latest tweet pointed to the challenges which explained the delay in Tesla’s entry and this is what prompted a kind of reaction which bordered on the theatre of the absurd.

West Bengal, Telangana, Tamil Nadu, Maharashtra, Punjab and Karnataka did not waste any time in tweeting out messages that they were ready to lay down the red carpet for the San Francisco-headquartered electric car maker. It was clearly a signal of fierce interstate competition to woo a top brand reminiscent of the  1990s.

This was the period when the gates were thrown open to multinationals and states like Tamil Nadu were on overdrive to get the likes of Ford and Hyundai to set up shop. It is different this time around with the auto industry clearly in a greater state of maturity and ready to take on new challenges like electric mobility.

It is in this space that companies such as Tata Motors, Mahindra & Mahindra, Hyundai, MG Motor and Mercedes have already sounded out their intent to take the story aggressively forward. None of them has, however, got the kind of exalted attention accorded to Tesla and this is what is truly perplexing.

As a senior representative of the auto industry says, “I just don't understand why India is so obsessed with Elon Musk. His coming to India is not going to make a difference except for a few hundred people who will buy a Tesla. If he wants to come to India, he has to come on our terms and not on his terms.”

Poster boy

Why then is the contrary happening? It is a no-brainer that Musk is the poster boy of the electric vehicle movement. Till he came along, the auto industry was in a state of absolute contentment with the strong guys raking it in and getting bigger by the day. Then the Volkswagen diesel scam occurred which pretty much changed the dynamics of the game.

When the world’s top carmaker found itself in the midst of a fudging exercise, the lawmakers decided that enough was enough and Europe, in particular, has now gone the extra mile in enforcing strict emissions standards. Electric has become one of the top priorities and the same VW, which was the villain of the piece till not-so-long ago, has made enormous strides in this space.

Industry observers are, in fact, certain that the German automaker will emerge tops in electric eventually along with Mercedes-Benz which has also drawn up an aggressive roadmap for the future. Yet, the halo that surrounds Tesla is only getting brighter because Musk has been the first mover and clearly played a big role in disrupting conventional thinking. 

It is a moot point if a world without Tesla would have seen the kind of strides made in electric lately. In the US, the two big daddies of Detroit — Ford and General Motors — are investing big bucks in electric while across Europe, Southeast Asia and Japan, the  electrification trend is only gathering momentum. 

There is no question that Elon Musk has been the pivot of this change and it is this aspect alone that makes him such a charismatic figure coupled with the fact that his interests lie beyond auto in areas like space exploration.

He is, of course, a businessman by the end of the day and this explains why he continues to press for lower import duties if he has to set up shop in India. It is not as if the country is critical to his growth — especially in the context of what the senior auto industry official quoted earlier has pointed out in terms of numbers — given that Tesla already has important manufacturing beachheads in China and Germany beyond its home base in California.

Viable model

For Musk to justify the few volumes he is going to sell in India, his company obviously needs a viable business model and the best way to go about it is to have an easier entry barrier without the burden of high taxes. For India, it makes terrific sense to have Tesla in its kitty purely from a branding point of view. Elon Musk appeals to GenNext and what could be better than that in a country where two-thirds of the population is under 30 years even if most of them may not be able to afford a Tesla.

Yet, is it fair to give the company preferential treatment when so many others have gone the extra mile in their localisation plans and even put out their models on the road? The Nexon EV, for instance, is already a well established brand and Tata Motors is pushing the envelope in creating a robust ecosystem for its electric foray. Others like Hyundai, M&M and MG Motor are also cranking up the EV game in a big way.

In all fairness, the Centre has not indicated if it will reduce duties further for EVs in a bid to get Tesla set up shop in India quickly. Other automakers who have already earmarked investments in this arena will not complain either since any benefit is welcome but will wonder if this decision was propelled by the sole reason to indulge this top American brand.

As for the states, they are as determined to go all out in the race for Tesla Motors. One would be right in wondering about West Bengal’s enthusiasm given its past record with the Nano project. Tata Motors had opted for this State to be home for the people’s car but stiff political opposition and agitations at the Singur site ensured that the project would not take off.  

The company then decided to have it relocated to Gujarat when the then Chief Minister, and now India’s Prime Minister, Narendra Modi wasted little time in readying Sanand as the Nano’s new home. 

West Bengal did not come out looking too good after the Singur debacle even while a section of the political class will insist that the agitation was intended to protect its farmers. The State also lost its longtime resident, Hindustan Motors, in 2014 when it decided to shut down its Uttarpara plant after it became crystal clear that the Ambassador had reached the end of its road.

Eyebrows were naturally raised when West Bengal made a pitch for Tesla but then this is an open contest between states and not about legacy issues. Tamil Nadu has also been advertising extensively in recent times on its intent to become an EV hub. Apart from Hyundai in the car space, its two-wheeler portfolio includes Ola Electric, TVS Motor, Greaves Electric and Simple Energy. Perhaps Citroen will also have an electric lineup at its Tiruvallur plant in the course of this decade. 

Tamil Nadu is keen to send out the right signals at a time when it is grappling with the crisis of giving the workforce at Ford an alternative means of livelihood. The American automaker had already announced last year that it would stop producing cars in India which meant the closure of its plants in Chennai and Sanand (Gujarat). In this backdrop, the policymakers in TN will be extra keen to send a more positive message on its electric mobility efforts.

It remains to be seen which of these states will eventually end up bagging the Tesla mandate. Perhaps that is jumping the gun since Elon Musk will first have to decide if India is on his radar at all. Till then, the wooing game will continue in earnest.