Tesla Entry into India: Finally, the light at the end of tunnel

As per media sources, Tesla is preparing to enter the Indian market by establishing its first showrooms in New Delhi and Mumbai. Additionally, Tesla has begun hiring for various mid-level positions in India, signalling its commitment to this new venture.

The company has also been offered land in Pune (Maharashtra) industrial belt for a manufacturing/assembly plant given presence of large number of auto ancillaries in that area.
The company is likely to import cars from its Berlin plant (Germany) rather than China
Our sense is that current price of most inexpensive model at Tesla i.e. Model 3 or even Model Y in international markets ex-China is pegged at >US$ 40,000, which even after reduced import duty of ~15% (vs. 100% currently), will likely costs ~US$ 46,000 i.e. ~ ₹ 39 lakh/unit landed in India.

This is neutral for domestic auto OEMs like M&M, Maruti, Hyundai, Tata Motors as they have less presence in that high price segment while can be a potential competition to the luxury EV segment players such as Mercedes Benz, Audi etc. given Tesla remains a very powerful aspirational brand.

What is more positive is that domestic Electric - PV industry size annually is ~1 lakh units vs. ~40 lakh units of PV sold domestically i.e. penetration of ~2%. So, it offers a very apt opportunity for all players to expand and grow the overall industry pie and penetration.
Against this backdrop we also expect final policy announcement from the government promoting foreign participation in domestic EV industry.

Brief Contours of policy which were finalised last year (March 2024) were: (i) concessional import duty of 15% for Electric Cars with minimum CIF value of US$ 35,000 to a maximum of 8,000 units per year over a 5-year period with maximum volumes under concessional duty being limited by duty forgone equivalent to its committed investment in India (min. ₹ 4,150 crore/US$500 million) or ₹ 6,484 crore (US$ 781 million) whichever is lower (ii) commissioning of manufacturing facility within three years of application approval, (iii) meeting of localisation content (domestic value addition; DVA) of 25% within 3 years and 50% within 5 years of application approval and (iv) adequate bank guarantees to safeguard India’s economic interests.

On the ancillary side, this is positive for the domestic EV ecosystem with potential beneficiaries seen as Sansera Engineering, Mayur Uniquoters and Uno Minda in our coverage universe and Sona BLW Precision Forgings, Motherson Group, Suprajit Engineering, among others outside our coverage universe