Tesla Faces Speed Bumps As It Takes First Steps Into India’s Nascent Electric Vehicle Market, Analysts Warn

Tesla has finally taken some concrete steps to enter the vast Indian market, yet the e-vehicle giant must now navigate an inefficient and corrupt political system, the nation’s lack of battery charging infrastructure and immense poverty that would make its cars affordable only to a tiny elite, analysts warn.

KEY FACTS
On Wednesday, Tesla hired Indian auto executive Manuj Khurana to lead its business development efforts there and is also seeking large retail spaces in major cities like Delhi, Mumbai and Bangalore where Tesla imports can be exhibited to prospective buyers.

Bangalore, a tech hub in the south, is also where Tesla is reportedly seeking to eventually build a manufacturing plant, its first in India, and which would spare Indian buyers from paying costly import taxes.

The electric vehicle market in India is in its earliest stages — of the 2.4 million cars sold in the country last year, only 5,000 were EVs.

Some analysts do not think Tesla can make much headway in India – the country lacks electric charging infrastructure and the cost of even the cheapest Tesla car (about $38,000) is still unaffordable for most people in the still mostly poverty-stricken country.

Ammar Master, a forecaster at consultancy LMC Automotive, told Reuters in January he expects Tesla to annually sell only 50 to 100 vehicles in India over the first five years – and mostly to “high net-worth individuals like movie stars and top business executives.”

KEY BACKGROUND
Tesla chief Elon Musk has long hinted about his ambitions in India. Last October in response to a tweet asking when the company might start selling EVs in India, he said “Next year for sure.

Thanks for waiting!” But, among other issues, he was put off by the Indian government’s imposition of high duties — as much as 100% — on imported cars. Ross Gerber, CEO of investment advisor Gerber Kawasaki of Santa Monica, Calif., told Forbes that while India has “enormous potential” its inefficient and corrupt political system makes it difficult for foreign companies to do business there.

But he thinks that despite India’s many problems, Musk was likely attracted to its huge population and its growing and highly educated middle class. “India has a highly advanced tech space and a very wealthy portion of the population that could [eventually] buy EVs,” he said.

“And they also have a huge need for efficient and clean energy in transportation. It just makes sense.” Colin Rusch, senior research analyst at Oppenheimer & Co., told Forbes that India could become an important market given its scale and potential for domestic growth. “We believe that India has always been on [Tesla’s] roadmap but timing and priority has been uncertain,” he added.

TANGENT
Tesla sold just under 500,000 vehicles worldwide last year, including about 135,400 in India’s huge Asian rival China, according to the China Passenger Car Association. Gerber told Forbes that in stark contrast to India, China has an electric charging infrastructure and the the government takes “a much more active role in managing the economy.” China has far more wealthy people, boasting nearly 700 billionaires, versus only 140 for India.

SURPRISING FACT
Gerber also said he thinks that Tesla may actually have faced more obstacles in its home base than in foreign countries, citing that in the U.S. “we have an entire sector of our economy that would rather see EVs fail because they’re losing money. You don’t deal with that in China. If the Chinese government says ‘we’re going EV,’ everyone is going EV. And if you don’t buy an EV, you’re not driving in Beijing. Similarly, if India says they’re going electric, the people will go electric.”

CONTRA
Tesla has also faced some troubles in advanced western countries which have stronger compliance and transparency than India. For example, Tesla just criticized Germany for its bureaucratic sluggishness in approving the start of operations at its newly constructed factory near Berlin – 16 months after the company first applied for a permit. “This [delay] discourages necessary investments in clean-energy projects and infrastructure and makes it practically impossible for Germany to achieve its climate goals,” Tesla wrote to German authorities. Transport Minister Andreas Scheuer sympathized with Tesla, tweeting the country must “simplify approval procedures, reduce bureaucracy and promote innovation.”

WHAT TO WATCH FOR
Gerber conceded that if Tesla eventually releases a more moderately priced car–which Musk has claimed they will, perhaps at a price of $25,000)–the company could sell more cars in India.

Source: forbes