Tesla has received a warm reception in India for its investment proposal, while its main competitor in the electric vehicles market, China’s BYD, has faced increased scrutiny by Indian authorities.
This situation provides an opportunity for Tesla to negotiate terms for entering India’s third-largest auto market without the competitive threat from BYD, which it faces in other emerging markets such as Thailand.
“The outcome in India will have an impact on the global EV race,” said Jasmeet Khurana of the World Economic Forum.
Since a meeting between Musk and Indian Prime Minister Narendra Modi in June in New York, Tesla has engaged in closed-door discussions with Indian officials to explore the potential for investing in a new manufacturing plant and building a low-cost $24,000 EV.
These talks have continued over the past week, with Tesla discussing the finer details of its plans to access India’s rapidly growing EV market, while Modi himself has been closely monitoring the developments, according to sources. These meetings have been kept confidential, with no photos or social media posts showcasing handshakes between Tesla executives and Indian officials, which is customary after high-profile meetings. On the other hand, BYD seems to be taking a backseat. Reuters reported that months after seeking approval for its own $1 billion investment in India, BYD is no longer eager to pursue the approval. Additionally, BYD is facing an investigation over allegations of underpaid import taxes in India.
One of the concerns of Indian officials is the national security implications of Chinese-made vehicles and the potential data collection by these vehicles. An official stated that India is “uncomfortable with Chinese automakers.”
While approval requirements for Chinese investments have become more stringent in India since the border clash between the two countries in 2020, the impact is particularly significant for the developing EV market in India due to China’s dominance in battery materials, battery production, and other key technologies.
Tesla also benefits from Chinese suppliers, which have helped lower production costs at its Shanghai factory. Now, Tesla aims to bring these suppliers to India, where it appears to have an advantage in negotiations with New Delhi.
India has informed Tesla that it will allow its Chinese suppliers to enter the country if they form partnerships with local companies, similar to Apple’s approach. However, India remains hesitant about BYD’s $1 billion plan, despite it being proposed as a partnership with a domestic engineering firm.
According to the Global Times, a Chinese state-run newspaper, the reported resistance to BYD’s investment plan “will lead to a chain reaction and deal a blow to the overall confidence of Chinese companies in investing India.”
BYD did not respond to requests for comment on the status of its investment plan in India or the import tax allegation. In a statement to Reuters, the company stated that it has been active in the Indian market for 16 years, selling commercial vehicles and passenger cars.
Tesla has not responded to a request for comment on its discussions with Indian officials. Musk previously mentioned in June that Modi was encouraging the company to make significant investments in India, and Tesla intends to do so.
INDIA’S GROWING EV MARKET
Tesla aims to sell 20 million cars globally by 2030, compared to 1.31 million in 2022. However, it faces challenges in expanding its Shanghai factory.
BYD was the largest seller of EVs and plug-in hybrids worldwide in 2022, with a total of 1.86 million units, primarily in China. It lags behind Tesla in terms of fully electric car sales.
“Tesla sees BYD as its main competitor, and both companies are expanding rapidly on a global scale,” said Gaurav Vangaal of S&P Global Mobility.
“If they want to achieve high volumes, they need to enter the Indian market,” he added, stating that the government’s incentives for local EV production make India a potential export base as well.
Estimates by S&P Global Mobility suggest that annual production of light electric vehicles in India will reach 1.4 million by 2030, accounting for nearly 19% of the projected total production of 7.25 million. In 2022, the production figure stood at less than 50,000 units.
The nascent EV market in India is currently dominated by Tata Motors, with its popular Nexon EV priced at up to $19,000. Chinese automaker MG Motor’s ZS EV starts at $28,000, while BYD’s Atto 3 retails at around $41,000 in India.
Toyota Motor, Hyundai Motor, and Kia offer mid-sized gasoline SUVs priced around $24,000, which aligns with Tesla’s entry point.
Tesla does not currently sell vehicles in India.
“Tesla is a sought-after brand in name alone,” said Sam Fiorani of AutoForecast Solutions. “However, if they offer an affordable product tailored for the Indian market, it has the potential to be a local success.”