Understanding India’s new EV policy: prospects for Tesla and others

India’s vehicle market leans towards mass-market vehicles priced between US$7,000 and US$20,000, with a rising preference for SUVs and crossover vehicles. However, there exists a niche for high-end vehicles, predominantly catered to by tech-savvy professionals with higher disposable incomes. The challenge for EV adoption in this segment lies in the significant price disparity, range anxiety, and a scarcity of affordable options compared to high-end ICE vehicles.

The recent rollout of India’s new EV policy marks a pivotal shift, especially for global automakers eyeing market expansion. This policy could ease the entry for companies like Tesla, making it a golden opportunity for them to establish a strong foothold in India. Tesla, with its significant global expansion appetite and capability to develop comprehensive EV production ecosystems, stands out as a particularly attractive player in the Indian market.

With increasing incentives under the new policy, Tesla can begin to build infrastructure and value chains crucial for attracting early adopters, even before establishing domestic manufacturing. This strategic move could grant Tesla a significant first-mover advantage in the Indian EV market, fostering brand loyalty and expanding market share as the EV landscape grows.

Tesla’s initial offerings, potentially the Model 3 and Model Y, could position it competitively against premium EVs and luxury car brands already present in India. These models, expected to be priced competitively after accounting for import duties, will cater to the high-end segment of the market, providing alternatives to traditional SUVs and sedans.

Furthermore, Tesla’s success in establishing manufacturing operations in India could enable it to leverage Production-Linked Incentives (PLIs) under the new policy more effectively than its competitors. Tesla’s experience in battery technology, vertical integration, and economies of scale positions it to maximise government subsidies, particularly with the auction of critical minerals for battery production in India.

However, Tesla faces challenges, including the need for upfront investment in manufacturing and charging infrastructure, competition from domestic EV producers like Tata and Mahindra & Mahindra, and the task of navigating a cost-sensitive market.

The new policy also highlights the crucial role of tier-one suppliers in building a robust supply chain ecosystem for sustainable growth. It incentivises local production, opening significant opportunities for collaboration between EV firms and Indian ancillary businesses, fostering the development of local R&D facilities.

India’s strategic location, combined with the new EV policy, not only positions the country as a potential global hub for EV production but also signals a major step towards sustainable mobility and economic growth. As the policy unfolds, close collaboration among stakeholders, effective navigation of challenges, and the seizing of opportunities will be essential to realise India’s vision of a greener, more prosperous future. This transformative period could amplify the global presence of EV manufacturers and enable them to access previously untapped customer demographics, setting the stage for a significant leap in India’s automotive industry.

Source: Canalys