Which Indian State will get Elon Musk’s Tesla electric car plant?

The cost factor will decide whether Tesla will be successful in India or not. Indians always yearn for the best car at affordable prices. But not many automakers succeeded in deciphering this unique Indian psyche. So, several automakers failed miserably and some of them even exited from the Indian market. Elon Musk might have already got a wind of the characteristics of the Indian automotive market

Elon Reeve Musk is no stranger to Indians, especially those who love cars. Of course, his appeal goes far beyond car lovers as the South African-born Musk, the Chief Executive Officer of electric vehicle (EV) major Tesla, is one of the most successful startup entrepreneurs in the world with a current net worth of over $185 billion. His business interests span across space (SpaceX), infrastructure (The Boring Company), nanotechnology (Neuralink Corp) and social media (X Corp), although he is more popular for the electric cars that Tesla dishes out.

Further, he is the only global business leader who gets massive publicity for himself, his companies and products without spending a penny on advertisements. He uses social media platforms including X, which he owns now, to achieve it. That way, he is the best corporate propagandist in the world. He also does weird things. He named one of his 11 children as X AE A-XII. But all of these traits pale when it comes to the business acumen that Musk embodies.

The 52-year-old, who had set his eyes on the Indian automotive market long back, is coming to India later this month. He delayed Tesla’s Indian foray plans, citing high import duties on automobiles and lack of favourable policy norms. However, the Indian government has steadfastly refused to offer any special incentives to Tesla. That’s a right decision as offering exclusive incentives to an automaker will anger other global auto majors.

However, the Narendra Modi government announced its Electric Vehicle (EV) policy last month, under which it offered slew of incentives for global automakers investing a minimum of $500 million in EV manufacturing facilities in India. Such companies can import their cars priced $35,000 or above at a lower import duty of 15 per cent. Under this, automakers can import up to 8,000 units a year. At present, such cars attract 70-100 per cent import duty depending on the technical specifications. This new policy will obviously facilitate easier entry for Tesla as it can import cars and sell while setting up its plant in India. So, Musk’s India visit assumes significance in the wake of the new EV policy.

During his upcoming two-day long visit, he will meet Prime Minister Narendra Modi. He is the second high-profile global business leader to meet Modi in a month after Microsoft co-founder Bill Gates met the Prime Minister last month. They had one-to-one interaction which was later made public. Now, it’s the Musk’s turn. This is all happening as the country is in the midst of its General Elections to choose its new government at the Centre. Modi knows how to play his political cards well. These high-profile meetings go on to prove that again. Such meetings will elevate his image among the youth, who are more aspirational now.

Of course, the country will also benefit from such meetings. There is no doubt about it.

Reportedly, Musk will announce Tesla’s plans for investments worth $3 billion dollars in India. It’s not yet clear whether he will announce the location of the proposed EV manufacturing plant.

At present, Tamil Nadu, Haryana, Gujarat and Maharashtra have good automobile ecosystems in India. Chennai is described as the Detroit of India as manufacturing plants of automakers like BMW, Hyundai, Ford, Nissan-Renault-Dustan and Royal Enfield are all located there. Commercial vehicle major Ashok Leyland and two-wheeler major TVS are also based out of Chennai.

For the uninitiated, Detroit city in the US is home to global auto giants of US origin such as General Motors and Ford.

While Haryana is home to automobile plants of Maruti Suzuki, Gujarat also has units of Tata Motors, Suzuki, MG Motor, Atul Auto and Ford. Pune in Maharashtra is home to luxury carmaker Mercedes-Benz, Vokswagen, Mahindra & Mahindra and Bajaj Auto plants. Andhra Pradesh also has some presence of the automotive industry as it has Kia and Isuzu plants, while Telangana has a Mahindra plant.

But given the big investments and a global image that a Tesla plant brings in, politics will obviously come into play when it comes to the new plant’s location. This implies that the outcome of the 2024 General Elections will also have a bearing on it.

As of now, Modi-led BJP is in the driver’s seat, but miracles do happen in politics. If the opposition block springs a surprise, states like Tami Nadu and Telangana, where I.N.D.I.A alliance members are in power, will have a chance to vie for the plant. Otherwise, it will go to Gujarat or Maharashtra. Other coastal states, including Andhra Pradesh, will be in an advantageous position if Tesla is keen on exporting cars from its Indian plant. Anyway, the Indian electric vehicle ecosystem will immensely benefit from the Tesla plant irrespective of the State that gets it.

But as of now, electric vehicle penetration is very low in India. In 2023, electric cars accounted for just two per cent of total sales. However, the central government has an ambitious target on this green mobility segment. It wants to increase EV sales to 30 per cent of total car sales by 2030. The presence of Tesla will obviously come in handy for the government to achieve its goal.

But then there are other challenges, along the way. The foremost one being lack of public charging infrastructure for electric vehicles. Furthermore, prices of electric cars are high compared to internal combustion engine (ICE)-based vehicles. People will not shift to electric vehicles if these cars are not cost-effective.

Interestingly, this cost factor will also decide whether Tesla will be successful in India or not. Indians always yearn for the best car at affordable prices. But not many automakers succeeded in deciphering this unique Indian psyche. Several automakers failed miserably and some of them even exited from the Indian market.

The mercurial Musk might have already got a wind of the characteristics of the Indian automotive market. Further, he should also realise that his propaganda tactics on social media will not work in India if his company fails to offer good, cost-effective products. Hope Tesla will offer affordable products in India. And Indians as well as Musk will benefit from Tesla’s much-awaited Indian entry.