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Aatmanirbhar Bharat, High Import Taxes Could Prove Disastrous for Tesla Eyeing India Entry

Tesla CEO Elon Musk. (Photo: Reuters)

Tesla CEO Elon Musk. (Photo: Reuters)

With the Indian government's push for 'Aatmanirbhar Bharat' and high taxes on imported vehicles, is it really a good time for Tesla to enter India?

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Arjit Garg

Elon Musk, Tesla's boss recently indicated that the electric carmaker could enter India by 2021. "Next year for sure," he said on Twitter in reply to a post with a photograph of a T-shirt with the message: "India wants Tesla". He further added, "Thanks for waiting." However, this isn't the first time Musk has announced his India plans.

As Tesla has been growing its reach to countries in Asia, India has been on the radar of Tesla for long now. In 2018, Musk said on Twitter that Tesla could “hopefully” be entering India by next year, in 2019. This was followed by a statement issued by IIT Madras in 2019, which mentioned that Elon Musk had said that the company’s entry to our country “is probably going to happen in a year’s time.” Earlier this year also, he had mentioned to enter India by next year.

Having said that, Musk has time and again blamed India's taxation system and difficult business model for delay in the entry in the past. While one can be hopeful that the current regime's push towards ease in doing business gives a sign of hope for Tesla, the recently announced initiative called 'Aatmanirbhar Bharat' can prove to be disastrous on the other hand.

Let's understand how much the Tesla Model 3 could cost in India by 2021, if they actually enter India. Tesla Model 3 is the cheapest and entry level electric car in the Tesla's portfolio. Since all the Tesla cars are semi-autonomous and high on safety, the Model 3 was initially launched at a starting price upwards of $40,000.

However, thanks to economies of scale, tone-down battery pack and better operational efficiencies, Tesla Model 3 now starts at $35,000 in the U.S, its home state. This model gets a 240 mile battery pack, rated as per the US driving cycle.

Tesla will bring this model to India to keep the prices in check which will attract an high import duty and the problem starts here. The Indian govt currently levies 25% import tax on CBU electric vehicles. Given the rise of Chinese products in India, Finance minister Nirmala Sitharaman proposed a hike on basic customs duty on completely built units (CBUs) of electric vehicles to 40% from the existing 25%.

Since it's highly unlikely that Tesla Model 3 will be sold through CKD route and neither can they source domestic battery or components, it will be priced close to $50,000 in India after import duty, freight and carriage charges and other expenses.

In Indian currency, this comes out be Rs 36 Lakh for a 390 km battery range. Then you have to pay all the taxes and registration amount. Even if you adjust the various subsidies provided by govt on EVs, Tesla Model 3 wouldn't cost less than Rs 40 Lakh in India, on road price.

For comparison, the Hyundai Kona with a similar size and a battery range of 452 km costs Rs 23 Lakh (approx) in the country. And that's just the price of buying the vehicle, as the ownership cost is even lower with Hyundai Motors having a better service network.

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In many Asian countries, like South Korea and China, Tesla has become a status-symbol for wealthy who wants to highlight their love for green vehicles, a trend started by the Toyota Prius in the west. Just so you know, Toyota did launch Prius in India at around the same price tag of Rs 40 Lakh and failed miserably.

But then, Tesla brings a certain brand image with itself, and has technology far superior than Hyundai Kona, Toyota Prius, or for that matter, almost 99% percent of cars available in India. They are also offering the Model 3 with various battery packs to suit your running and level 3 autonomous driving.

The question is not 'if' Tesla wants to enter India, as we know for sure that Elon Musk is eyeing the Indian market desperately for years now, the question now is, 'when' will they enter India?


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