Tesla Models To Cost Over INR 35 Lakh In India Even With Lower Tariffs: CLSA

Amid speculations over Tesla’s India entry, a report by CLSA said that the electric vehicle (EV) maker’s cheapest car, Model 3, would cost around INR 35 Lakh to INR 40 Lakh in the country. 

It estimated this price range for Tesla’s Model 3 by adding road tax, insurance and other costs to the price of the company’s cheapest car in the US, which retails at around $35K. The total cost comes to around $45K in India, which translates to INR 35 Lakh to INR 40 Lakh, CLSA said. 

The brokerage firm anticipates this price range for the Tesla car in India despite the lower 15% to 20% import duties payable on foreign-made cars. 

It is pertinent to note that the new EV manufacturing policy, brought by the union government last year, envisages a lower 15% import duty on vehicles above $35,000 CIF (cost, insurance, and freight) value. Currently, cars above $40,000 CIF value are charged 110% (including agriculture cess) import duty, while a duty of 60% is applicable on cars below the threshold. 

However, to avail the lower rates under the new EV manufacturing policy, EV makers will have to set up a unit in the country with a minimum investment of at least INR 4,150 Cr. 

As per the Times Of India, the government is all set to notify the new EV policy in the coming weeks. The new policy is expected to stipulate a minimum turnover of INR 2,500 Cr in the second year for companies applying for benefits under the scheme.

Commenting on Tesla’s entry, CLSA said in the report, “We believe that if Tesla positions itself with Model 3 at an on-road price that is 20-50% higher than models like Mahindra XEV 9e, e-Creta, e-Vitara, etc, it would not significantly impact domestic EV models. Factors such as spacious interior, features, aesthetics, better resale value visibility and right pricing are the key drivers in car purchase decisions, regardless of the powertrain, in our view.” 

To penetrate the Indian market better, the brokerage said it is imperative for Tesla to establish its own manufacturing unit in India to scale up (with its current portfolio) and price its vehicles at less than INR 35 Lakh to INR 40 Lakh on-road.

It added that even if Tesla manages to launch a sub-INR 25 Lakh on-road model in India and gains market share, it would still not have any significant impact on the incumbents like Maruti Suzuki, Hyundai or Tata Motors. 

Besides, it said even if Tesla manages to launch a sub-$25,000 car in the country, it would see a “meaningful” compromise in its features and specifications in the Indian model versus its traditional models. 

CLSA, in its report, also underlined that setting up a local factory and enhancing localisation could help Tesla produce competitively priced models compared to domestic players.

“Setting up a local factory, enhancing localisation and benefiting from lower duties on sub-assembly and battery pack imports would help Tesla produce models priced competitively with the premium offerings from domestic players,” read the note.

The brokerage’s take comes amid a bevy of reports around Tesla bolstering plans to enter India. Just a day ago, it was reported that the company is preparing to ship a few thousand of its electric cars to India over the coming months. 

As per reports, the Elon Musk-led company is also looking to establish a manufacturing unit in the country and is in talks with multiple states, including Gujarat, Maharashtra and Tamil Nadu, for it.

The EV maker is also said to have reportedly finalised the locations of its showrooms in Delhi and Mumbai and is currently hiring talent to give steam to its bid to enter the Indian market.