Musk's Tesla enters India in 2021, still remains in test mode

A year has gone by since Tesla CEO Elon Musk announced he is finally entering India. For the rich and famous eagerly awaiting the arrival of Tesla cars, the arduous wait continues owing to the import duty tussle between Musk and the government amid repeated "come and manufacture/assemble your cars here" calls from the top ministers.

Tesla in 2021 was busy testing Model 3 at several locations, but concrete steps are yet to be taken to finally roll out the most coveted electric car for its fans in India.

Last month, Union Minister for Road Transport and Highways, Nitin Gadkari, informed that Tesla car would cost about Rs 35 lakh in India.

"This indicates that both Tesla and the government have a mutual interest in it. Tesla has already set up a corporate office in Mumbai, secured an office in Bengaluru and is looking for key executives to start operations in the country. We expect Tesla to start selling cars in India around mid-2022," Soumen Mandal, research analyst, IoT, Automotive and Devices Ecosystem at Counterpoint Research, told IANS.

"However, this will materialise if Tesla commits to start manufacturing in India," he added.

With a $39,990 global price tag, Tesla Model 3 may remain as an affordable model in the US but with import duties, it would become unaffordable in the Indian market with an expected price tag of around Rs 60 lakh.

Currently, India levies 100 per cent tax on the imported cars of price more than $40,000 (Rs 30 lakh) inclusive of insurance and shipping expenses, and cars less than $40,000 are subject to 60 per cent import tax.

The government may consider lowering import duty along with offering other sops to Tesla but for that, the EV major would have to invest in setting up a manufacturing facility in the country.

Did global auto component shortage and supply chain issues affect Tesla's 2021 plans for the Indian market or is it merely concerns over high import duties on fully imported cars?

According to Glenn O'Donnell, Vice President and Research Director at Forrester, Musk has made statements that the semiconductor shortage is causing delays and price increases.

"His SpaceX 'Starlink' service is also suffering similar delays. A Tesla car contains an extreme amount of silicon of many forms. Some chips are more constrained than others, but all of them are under pressure," O'Donnell told IANS.

"However, if your car has dozens or hundreds of chips, it only takes one of them to shut down delivery of that vehicle. This applies to conventional vehicles, not just EVs," he added.

On the global level, Tesla had a minimal impact during Covid-19 pandemic last year.

"It never looked back from Q3 2020 onwards. Moreover, Tesla has maintained a very good inventory level. It can sustain 2-3 quarters easily if the automotive industry faces a slight component shortage," the Forrester analyst told IANS.

In Q3 2021, Tesla production and deliveries increased by 64 per cent and 73 per cent, respectively, on a yearly basis.

"We think component shortage will not have any impact on Tesla entering India. Amid discussions between the government and Tesla regarding local production may force Indian consumers to wait a bit for their dream electric car," Mandal noted.