HANOI, Vietnam (AP) — In April 2016, Elon Musk invited Indians to pre-order the upcoming Tesla Model 3. Vishal Gondal was among the first to sign up, putting down a $1,000 deposit for a car that never arrived.
Gondal, founder and CEO of a health-tech startup called GOQii in India’s financial capital, Mumbai, wasn’t sure when the automaker would launch in India or how much the car would ultimately cost. But the Elon Musk fan was excited about the Model 3 and willing to wait.
In the eight years since Tesla first promised to sell cars in India, other automakers have launched their own EVs. But the U.S. automaker has failed to deliver, apparently due to concerns that taxes would make selling cars in India too expensive, combined with the difficulties of building an Indian factory if it decided to move production out of China.
After six years without Tesla or a clear explanation of the company’s plans for India, Gondal bought an electric SUV from German automaker Audi. He got his $1,000 back in January 2023 with the help of a friend who helped him track down a Tesla sales manager in India.
India is the world’s third-largest auto market after China and the United States. But it’s unique. The average price of cars sold in India in 2023 was $14,000, compared to $47,000 in the United States. An American can buy a new Tesla 3 for around $40,000. That’s the price of a luxury car in India, and buyers would expect excellent after-sales service.
“I think Tesla is a great technology company. But they just don’t know how to sell luxury cars,” Gondal said.
Since then, other automakers that sell luxury cars in India have also started selling electric vehicles. Hemant Suthar, a Mumbai-based director of a design studio who also reserved a Tesla in 2016 before finally getting his money back in 2023, said he didn’t think the minimalist Tesla could compete with some of the more luxurious electric cars now plying Indian roads.
In a bid to lure automakers like Tesla while protecting domestic automakers like Mahindra and Maruti Suzuki, India in March 2024 slashed import duties on electric cars priced below $35,000 to 15%, from 70%-100% — provided the automaker commits to building a manufacturing plant in the country within three years.
Despite his earlier enthusiasm, Musk in 2019 expressed concern that import tariffs could double the price of Teslas made in India, making them “unaffordable.” Many in India expected Musk to announce plans for a factory there in April, but he canceled an expected trip at the last minute, citing “very onerous Tesla commitments.”
Tesla did not respond to an emailed request for comment.
The electric car market has changed dramatically in India and elsewhere over the past five years. Tesla’s own position has also changed since the company built huge factories in China, Germany and the US. Sales are slowing and its only new product, the Cybertruck EV, has little market outside the US. As a result, global sales have fallen year-on-year for two straight quarters.
According to a filing with the U.S. Securities and Exchange Commission, the company can build 2.3 million cars a year. Production in 2023 grew 35% to 1.85 million vehicles. In the first half of 2024, Tesla sold 831,000 vehicles globally, well below the more than 1.8 million for the full year that Musk had predicted.
The novelty of electric cars has worn off, says Tu Le, founder of consultancy Sino Auto Insights.
“What was a huge opportunity five years ago is now almost a burden around their neck,” he said.
To maintain a leading position among global automakers, Tesla needs new, more affordable cars for emerging markets like India, Tu said. Even a car priced at $25,000 is not competitive in China, given the dominance of Chinese EV makers like BYD. They are expanding overseas with both low-cost and premium cars, eroding Tesla’s first-mover advantage in a country like India.
“From now on, in every market where BYD (Tesla) operates, they will look at their watch and say, ‘What took you so long?’” Tu said.
India’s growing auto market is dominated by the largest carmaker Maruti Suzuki, followed by South Korea’s Hyundai Motors and India’s Tata Motors. Sales of electric vehicles were set to double in 2023 but still accounted for just 2% of total auto sales, according to market research firm Counterpoint Research. Of this, Tata Motors held more than two-thirds of the market, while Indian automaker Mahindra & Mahindra and China’s BYD saw growth.
BYD began making batteries in India in 2008. It was one of the top five EV brands in India in 2023, despite selling just two models: the six-seater e6 MPV and the Atto 3 SUV, according to Counterpoint. It launched the BYD certification mark in India in March 2024.
Many in India, a relatively small and crowded EV market, are skeptical about EVs. Ishan Raghav, editor-in-chief of Indian auto magazine autoX, said that to win over customers with an affordable, mass-market EV, Tesla would have to position its cars at a “sweet spot” of around $30,000.
“The only way they can do that is if they build that car in India,” he said.
India says it is not restricting imports of Chinese electric vehicles. But ties between China and India soured after a military conflict in July 2020, Raghav noted, and protections for domestic automakers will create other hurdles.
Even if Tesla were to sell cars in India after agreeing to build a factory within three years, most imported Teslas would sell for what luxury cars from established players like Mercedes Benz and Audi cost. Those automakers have been in India for decades and already have extensive dealership and service networks.
Tesla has sold cars directly to U.S. customers, but dealers play an important role in enticing customers with a luxury experience, said Matthew Degen of Cox Automotive, a U.S. auto research firm.
“You go to a real location, you meet people, there are nice lounges. Now Tesla has showrooms, but that’s different than dealerships,” he said.
Tesla would also need to build a charging network in India as the number of electric cars already on the market is relatively small.
Musk said on an earnings conference call in July that Tesla is expanding its factory capacity and that its affordable car — a small model expected to cost about $25,000 with a new generation of vehicle parts and some features from current Tesla models — is “on track” for delivery in the first half of 2025.
The company’s plans for India are still unclear.
Rajesh Kumar Singh, a federal official who heads India’s Industrial Growth Promotion Agency, said in a TV interview that the Tesla executive with whom Indian officials had spoken had been “fired” and that India did not know what the company was planning.
“We really don’t know,” he said.
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