China predicts Tesla not going to work in ‘underprepared, immature’ Indian market: Report

China is reportedly unhappy with Tesla CEO Elon Musk’s plan to set up an electric vehicle plant in India. Musk posted on X that he is looking forward to meeting PM Narendra Modi in India. In June last year, following a meeting with PM Modi in New York, Musk had said, “I am confident that Tesla will be in India… as soon as humanly possible.”

It is widely reported that Musk is coming to India to announce his ambitious project, the groundwork for which was being done for years. The project is likely to see Tesla commit at least $2-3 billion investment as it sets up a factory to manufacture entry-level electric cars (speculated as Model 2 to be priced around Rs 25 lakh).

Besides, he is also expected to discuss his Starlink project in India, for which the Narendra Modi-led government is said to be fast-tracking the application of Starlink for a satcom licence.

However, China seems to be unhappy with Tesla’s projected entry to the Indian markets. A report in The Global Times stated that it would be difficult for India to invite Tesla as the US carmaker may not work in a ‘grossly underprepared and immature Indian market’. 

The report mentioned that Tesla’s upcoming investment in an EV facility in India will benefit the country and enhance EV production. However, it may not be a wise decision for the EV maker.

Tesla operates four electric car factories globally in California, China, Texas, and Germany. Among them, Tesla Giga Shanghai in China stands out for its significant production volume. This factory has consistently manufactured over half of all Tesla electric cars in recent years, showcasing its pivotal role in Tesla’s global production network.

The article said: “As for Tesla, which focuses mainly on the mid- and high-end sectors and mature markets, nobody knows if it will find success in India. While India’s EV market is growing, its size is small. Some statistics showed EVs accounted for just 2.3 percent of total passenger vehicles sold in India in 2023.”

Challenges noted for Tesla if it launches in India

1. The article said India faces large-scale adoption of EVs in the absence of public charging infrastructure. 

2. It noted that there is a power shortage in India. Besides, India’s expansion of coal mines and power plants to generate more power will make it hard to meet climate goals.

3. The article noted that amid these challenges, it would be tough for Tesla to make profits in India’s immature market.

4. It further noted that the limited domestic production of core components will be a big blockage for Tesla. “One of the biggest issues is the limited domestic production of core components like lithium-ion batteries for EVs. India is starting relatively late in trying to create an indigenous EV supply chain,” the article said.

5. The article further added that India should take a more realistic, step-by-step approach to host Tesla to manufacture cars in the country.  “Given the complex economic landscape, India’s EV ambitions should, more realistically, be implemented step by step with patience and openness,” it says. “In this process, it is advised that India consider strengthening cooperation with neighboring countries and promote manufacturing development with a more pragmatic attitude.”

It is to be noted that the Indian government has recently approved a new electric vehicle policy keeping in mind Musk’s long-standing request. The new policy will allow the import of completely built-up electric cars that have a minimum cost, insurance and freight value of $35,000 (Rs. 29.2 lakh) at a 15% import duty for five years in exchange for a minimum investment of $500 million to start local manufacturing. India levies import duty of up to 100% on completely built-up cars.

In the recent past, the Narendra Modi-led government rejected China-based automaker BYD’s proposal to set up a $1 billion factory in India in partnership with Huderabad-based Megha Engineering and Infrastructure Ltd. China’s BYD Auto overtook Tesla in the fourth quarter of 2023 to become the largest electric carmaker in the world.

In 2022, the Centre blocked Great Wall Motor, a Chinese carmaker, from purchasing a manufacturing plant from General Motors in India. SAIC Motor Corporation’s MG Motor has partnered with India’s JSW Group to produce electric vehicles.