Tesla is planning to set up a plant in India as it pushes for more market share in Asia and Europe. India’s transport minister Nitin Gadkari told national daily, the Indian Express on Monday that the electric vehicle giant will arrive in the country early next year.
The move underscores Tesla’s plan to explore emerging markets and India’s determination to embrace cleaner energy. India has a 2030 target to make the country a 100% electric vehicle (EV) nation, as it seeks to reduce its dependence on oil and curtail its pollution problem. But the target has been stymied by lack of investment in manufacturing and infrastructure such as charging.
Gadkari said although the world’s most valuable automaker is setting up a plant in India, a lot of other Indian companies are also working on electrical vehicles that might be more affordable, but technically as advanced as Tesla.
According to him, Tesla will start operations with sales and then, depending on market progress, look at assembly and manufacturing. He added that “India is going to become a number 1 manufacturing hub for auto in five years.”
Apart from its push for cleaner energy, India has been fighting for a market in the tech space in Asia, where China rules. The recent border conflict between the two Asian giants appears to have triggered the quest now more than ever.
Tesla CEO Elon Musk had in October, in a tweet response to a question about Tesla’s intention to establish in India, acknowledged the company’s plans to do so “next year.” He confirmed in another tweet response on Sunday that the plan still holds, but it’s not happening in January.
Model 3, Tesla’s cheapest model will be the first to be launched. Economic Times on Sunday said the prices will start at over $74,739 (5.5 million Indian rupees), a price considered affordable for the Indian market, and sales will start in the second half of the year.
The move will offer Tesla a chance to amend the dented relationship it has had with some of its Indian customers who were among the first to make $1,000 deposits for Tesla cars back in 2016 and are yet to receive their cars. Some of the customers told Indian Express that they felt let down by the company.
The move also marks the first time that Musk is taking a shot at a plant in a developing nation, and its success may well determine if the American company will show interest in other nations, particularly in Africa. But it will be a long shot as electric vehicle infrastructure is still lacking in most developing countries.
In 2017, Musk said Tesla cars would come to India in summer. But that didn’t happen, and resulted in the delay in delivery of cars to Indian consumers who had made subscriptions. Musk blamed the situation on the government’s FDI policy which he said in a tweet, required “that 30% of parts must be locally sourced and the supply doesn’t yet exist in India to support that.”
India was grappling with infrastructural deficiencies that will enable the operation of electric vehicles then. But a lot has changed now. There are over 10 world class EV manufacturers in India, including Mahindra Electric, the pioneer of electric vehicles in the country, who built its first car as early as 2001. And there is Tata Motors, the largest automobile manufacturer in India, who is among new entrants in the electric vehicles manufacturing.
With the increased EV infrastructure in India, including rampant charging stations, Tesla will only have to worry about competition with indigenous manufacturers, whose cars are likely to be more affordable, not the FDI policy.