This Wednesday, Tesla, Inc. (NASDAQ: TSLA) CEO Elon Musk has revealed on Twitter Inc. (NYSE: TWTR) that the electric car manufacture is in talks with the Indian government regarding a factory constriction. Tesla’s plan to launch in India is taking shape.
“In discussions with the government of India requesting temporary relief on import penalties/restrictions until a local factory is built.” Elon Musk tweeted.
Tesla’s possible upcoming expansion into India is a big deal. India is committed to the cause of renewable energy and green mobility, and Tesla, as a sustainable energy company producing zero-emission vehicles, is a perfect fit. According to a research by HIS Markit, India is on a trajectory to become the world's third-largest auto market. Plus, the country is pursuing an ambitious vision the significantly reduce fossil-fuel cars in favor of all-electric cars by 2030.
Despite the potential the company has to succeed in India, there several challenges that need to be overcome.
First, Tesla’s cars are expansive. The Model X priced at about $90,000, and the Model S, at about $70,000, both way above the average budget acceptable in India. According to a report by CNBC, The Model 3 sedan, which starts at $35,000 and considered an affordable option in the United States, is still a high-end luxury product by Indian standards.
"About 85 percent of the market is filled with value-conscious customers, [which] has the largest potential for growth," said Chetan Maini, the creator of Reva, India's first electric car. "Successful solutions designed so far have considered the price points they are willing to afford. Foreign or local electric cars (EVs) will grow in India only when there's price parity with its internal combustion engine (ICE) equivalent."
Another major challenge is India’s infrastructure, which lacks roads, charging stations, power storage, service centers and suppliers. "The key challenges to adoption of EVs in India are low penetration of charging infrastructure," said Mahesh Babu, CEO, Mahindra Electric, the electric vehicle division of Mahindra and Mahindra. "Given these conditions, it is understandable that local as well as foreign players may hesitate to expand in the Indian market."