Tesla brings no immediate threat to Indian EVs, say experts

Tesla, the global leader in electric vehicles (EVs), is finally making its long-anticipated entry into India. The company has secured a prime location for its first showroom in Mumbai’s premium Bandra-Kurla Complex (BKC), as it finally taps into one of the world’s fastest-growing automobile markets. This strategic move comes amid growing competition, government policy shifts, and India’s evolving EV infrastructure.

Tesla has signed a lease agreement for a 4,003-sq ft space in the Maker Maxity building in BKC, an area that hosts high-end retail outlets and corporate offices.

Effective 16 February 2025, the lease will see Tesla pay an initial annual rent of Rs 3.69 crore ($446,000), increasing by 5 per cent each year, reaching approximately Rs 4.13 crore ($542,000) by the fifth year. The showroom’s proximity to Mumbai’s international airport and financial hubs underscores Tesla’s intent to cater to a premium clientele.

Following Mumbai, Tesla is set to expand its presence in India’s capital, with plans for a second showroom at Indira Gandhi International Airport in Delhi. The company has also begun recruiting for various roles in both cities, indicating a ramp-up in operations.

Tesla’s decision to establish a presence in India follows Elon Musk’s discussions with Prime Minister Narendra Modi in the US, which helped pave the way for policy adjustments.

A proposed reduction in import duties — from the existing 110 per cent to 15 per cent for EVs priced above $35,000 — could be a game-changer for Tesla and other international players looking to enter the Indian market.

The revised tariff framework is expected to boost demand for high-end EVs, making them more accessible to Indian consumers.

While Tesla’s entry has generated excitement, industry analysts remain cautious about its success in India’s cost-conscious automotive market.

At present, Tata Motors dominates the EV segment with an over 60 per cent market share, followed by JSW-MG Motors at 22 per cent and Mahindra & Mahindra. These brands offer EVs at a significantly lower price than Tesla’s base model, which is expected to start at around $40,000 (Rs 33 lakh).

Given this price gap, Tesla will likely compete with luxury brands such as BMW, Mercedes-Benz, and Hyundai in India rather than mass-market EV makers. Unless Tesla develops a lower-cost model tailored for India, its reach may remain limited to a niche segment.

Another potential challenge for Tesla is India’s road infrastructure. Tesla vehicles are known for their low ground clearance, which may not be well-suited for Indian roads, requiring design modifications.

Additionally, the country’s EV charging infrastructure remains in its nascent stage, with only about 25,000 charging stations nationwide. Although the government and private players are aggressively expanding charging networks, Tesla will need a robust supercharger presence to ensure customer convenience.

The entry of Tesla has sparked reactions from Indian auto giants. JSW Group chairman Sajjan Jindal has expressed scepticism about Tesla’s ability to dominate the Indian market, stating that local manufacturers like Tata Motors and Mahindra & Mahindra have an advantage in understanding consumer preferences and manufacturing cost-effective EVs.

"Elon Musk is a visionary, but succeeding in India is not easy. Indian companies are already leading the EV space here, and Tesla will face stiff competition," Jindal remarked at a recent industry event.

Despite these challenges, India presents a lucrative long-term opportunity for Tesla. The government has set ambitious EV adoption targets: 30 per cent of private cars, 70 per cent of commercial vehicles, and 80 per cent of two- and three-wheelers to be electric by 2030. Passenger EV sales have surged over 2,000 per cent in the last five years, from 4,700 units annually to over 100,000, indicating strong demand.

To further accelerate adoption, India offers some of the world’s highest subsidies for EVs, covering up to 46 per cent of the price of top-selling models. The recently introduced policy also mandates foreign automakers to invest a minimum of $500 million and commence local manufacturing within three years, ensuring that companies like Tesla contribute to India’s production ecosystem rather than solely relying on imports.

Tesla’s India entry is a significant milestone in the country’s transition toward sustainable mobility. While challenges such as pricing, infrastructure, and competition remain, Tesla’s brand appeal and potential policy support could give it a foothold in the premium EV space.

The coming years will determine whether Tesla can adapt its strategy to meet Indian market demands or whether local players will maintain their dominance. For now, all eyes are on Mumbai’s Maker Maxity showroom as Tesla makes its long-awaited debut in the subcontinent.