Tesla's India Entry: How Much Would Cheapest EV Model Cost Post Import Duty Cuts?

Tesla, led by Elon Musk, is preparing to enter the Indian market, but even with a reduction in import duties to below 20 per cent, the most affordable Tesla model is expected to cost around ₹35-40 lakh, according to a report by CLSA, a global capital market company.

The report noted that Tesla's cheapest Model 3 currently costs approximately $35,000 (around ₹30.4 lakh) at the factory level in the United States.

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Despite a potential reduction in import duties to 15-20 per cent in India, additional expenses such as road tax and insurance would push the on-road price to around $40,000, or roughly ₹35-40 lakh, reported ANI.

It stated, "The cheapest Model 3 for Tesla in the US is c.USD35k. With tariff lowered to c.15-20 per cent in India, along with road tax, insurance and other costs, on-road price would be c.USD40k, which is close to Rs3.5-4m."

If Tesla positions the Model 3 at a price 20-50 per cent higher than domestic electric vehicles such as the Mahindra XEV 9e, Hyundai e-Creta, and Maruti Suzuki e-Vitara, the report suggests it is unlikely to significantly disrupt the Indian EV market.

Even if Tesla introduces an entry-level model priced below ₹25 lakh on-road and gains market share, CLSA believes that the recent decline in Mahindra & Mahindra's stock has already accounted for this possibility.

However, the report indicates that Tesla's arrival will not have a major impact on established Indian automakers, as EV adoption in India remains lower than in China, Europe, and the United States.

Tesla is expected to launch its models in Delhi and Mumbai in the coming months. The company has officially commenced hiring in India, marking a crucial step in its long-awaited market entry.

On February 18, Tesla posted a job listing on LinkedIn for a Consumer Engagement Manager position in the Mumbai Metropolitan Region.

The report further emphasised that Tesla would need to establish a manufacturing facility in India to make its vehicles more affordable and expand its operations, even if import duties are lowered below 20 per cent.

It highlighted that, under India's EV policy, Tesla could benefit from a reduced import duty of 15 per cent on up to 8,000 units annually if it invests over ₹4,150 crore in setting up a local manufacturing plant.

The report also drew comparisons with India's motorcycle market, noting that Harley-Davidson's X440, which is priced 20 per cent higher than the Royal Enfield Classic 350, sells only around 1,500 units per month, whereas the Classic 350 achieves monthly sales of approximately 28,000 units.

This suggests that Indian consumers are highly price-sensitive, posing a challenge for Tesla to gain market traction unless it offers competitive pricing.

Ultimately, Tesla's success in India hinges on whether it commits to substantial local investment.

Without setting up a manufacturing base, even reduced import duties may not make Tesla's vehicles accessible to a large segment of Indian buyers.