EV giant Tesla's India entry may have more symbolic than strategic value

Tesla, the poster boy of full self-driving cars, has finally cruised into India. Globally, whenever Tesla enters a market, it increases the penetration of battery electric vehicles (BEVs). In India, however, that might not be the case. 

Given its price — ₹60 lakh for the Model Y rear-wheel drive (RWD) and ₹68 lakh for the Model Y long range — Tesla sits firmly in the luxury EV segment in India and is, therefore, unlikely to impact existing mass-market EV players. 

Analysts believe Tesla will first focus on building the Model Y brand before expanding — both in terms of volume and models.

The Model Y costs more than six times the average selling price of cars in India, and even over the next five years, it is expected to cost 2.4 times more, said Jay Kale, analyst with investment bank Elara Capital. 

“In the EU, the US, and China, this ratio is around 1.0–1.5 times, and with that, Tesla’s BEV market share is in the range of 10–15 per cent in the EU and China, and 44 per cent in the US. This translates into an overall PV (personal vehicle) market share of less than 5 per cent in these regions,” Kale said in a note on Wednesday. 

Assuming BEVs comprise 10–15 per cent of the Indian PV market by 2029–30 (FY30), Tesla is likely to account for 1.5–2 per cent, Elara said. And if BEV penetration hits 30 per cent (bull scenario), Tesla may garner a 3–4.5 per cent share of the PV market, it added. 

“Hence, we do not see its entry into India as a major threat to domestic OEMs (original equipment manufacturers), but it could be instrumental in raising awareness about EVs,” Kale said. 

That said, Kale added they believed Tesla’s superior and pioneering software experience would become a benchmark for the EV industry in India, and that domestic OEMs would have to up their game. 

Wealth manager Bernstein echoed the sentiment. Tesla, it said, would focus on building the brand rather than mainstream volumes. This meant there would be limited immediate impact on local automakers such as Mahindra & Mahindra, Maruti Suzuki India, and Tata Motors. “The situation could change in the medium term as Tesla is working on a sub-$25K affordable EV,” Bernstein added. 

While maintaining that Tesla’s premium entry price did not pose a volume risk for M&M and Tata Motors, a research report by financial services firm Macquarie said the Austin (Texas)-headquartered firm’s pricing strategy, ramp-up of its distribution network, and India’s auto policy would be key variables to track. 

Tesla’s products vary significantly, and target customer segments do not overlap, analysts at Citi said. At the current price point, they don’t believe potential Mahindra XUV 9e customers are likely to shift to Tesla. “The products vary significantly and target customer segments also do not overlap,” Citi said. However, “if duties are reduced or if local manufacturing starts, competition could escalate for the Indian OEMs,” it added. 

In the future, even if an India–US or India–EU free trade agreement is signed, and Tesla imports the Model Y from the US, it will still cost more than its current market price of $44,900 (ex-Federal credits), which translates into ₹39 lakh. This is still 24 per cent higher than M&M’s 9e (Pack 3, 79 kWh) and 31 per cent more than the Tata Harrier EV (Empowered QWD 75 ACFC). 

  Not quite a smooth ride 

Tesla’s India outing will have its challenges. 

Auto industry veterans feel the electric auto major is likely to face stiff competition here unless it rolls out its driverless cars. “I personally drive a Tesla occasionally. Without the driverless option, it is not an exciting product in Indian conditions,” said an automobile industry veteran. “Moreover, we already have established products in the segment.” 

India’s premium market segment stands at 51,000 units per annum — barely 1 per cent of total vehicle sales. It’s a small pie, for a share of which global majors like Mercedes-Benz, BMW, Audi, and Jaguar Land Rover have already built strong ecosystems, including service networks and local assembly lines. 

Within the PV industry, EVs account for a mere 4.5 per cent (as of June 2025). For the luxury PV segment, they form around 10 per cent, with BMW dominating with a 53 per cent market share, followed by Mercedes (33 per cent). 

Adding to Tesla’s challenges, its global competitors — such as Chinese EV manufacturer BYD and Vietnamese player VinFast — are expanding into India, with better service strategies.  

VinFast plans to be present in more than 30 cities through its dealership network and has also roped in service partners. BYD is also scouting for local partners in India. 

 

  The shift to EV 

Tesla has taken its own sweet time coming into India – more than a decade, in fact, since discussions began. 

Tesla had zeroed in on India as one of its probable manufacturing destinations in Asia in 2014. Prime Minister Narendra Modi’s visit to Tesla Motors’ plant in San Jose in September 2015 fuelled speculation about the company entering India. 

Then in July 2016, Union Minister Nitin Gadkari also visited the Tesla unit and offered land near major Indian ports to facilitate exports to South and Southeast Asian countries, while asking the company to make India its Asia manufacturing hub. 

However, even after several rounds of negotiations around reducing duties and offering incentives, there has been no commitment from Tesla to start local manufacturing. 

Many see Tesla’s India entry as an attempt to address the capacity glut at its global plants, from where excess inventory might be brought to India. 

Tesla currently has a manufacturing capacity of 2.5–3 million units across the US, Germany, and China. 

The India entry is thus seen as more symbolic than substantial — a branding effort, insiders feel. 

It is too early to say whether India will become a core market in South Asia for Tesla. 

In China, its entry led to a transformation of the EV market. Earlier, EVs were largely seen as a commercial choice rather than an aspirational one. 

“The real shift happened when Tesla opened its Gigafactory at Shanghai; since then, EV penetration took off in China,” Elara said. “It was Tesla that was the first EV OEM globally to generate buzz about EVs, positioning them as aspirational products, which started attracting customers,” it added.  

China’s EV penetration was 3.8 per cent in 2019. Tesla entered the market in December that year and began selling cars in 2020. China’s EV penetration has been rising steadily since; it shot up to 24.6 per cent in 2024. 

Kale believes that the aspirational aspect needs to be highlighted for consumers to shift to EVs — something Tesla is well-positioned to offer. So, this shift could happen in India too. 

Unlike traditional auto giants such as Volkswagen and Honda, Tesla has chosen not to invest heavily in conventional advertising channels like television. Instead, it has relied on the power of celebrity influence and word-of-mouth, which have helped shape its image as a premium, niche brand. Its early adopters included actor Brad Pitt, Google cofounders Larry Page and Sergey Brin, eBay’s first president Jeff Skoll, and Xiaomi Chief Executive Officer Lei Jun. 

Will it adopt a similar strategy in India? Will it shape the country’s EV landscape? The answers will unfold as Tesla travels some distance in India.