In April 2016, Elon Musk invited Indians to preorder the upcoming Tesla Model 3. Vishal Gondal was one of the first to sign up, paying a $1,000 deposit for a car that never arrived.
The founder and CEO of a health-tech startup called GOQii in India’s financial capital Mumbai, Gondal wasn’t sure when the automaker would launch in India or how much the car would eventually cost. But the Elon Musk fan was excited about the Model 3 and willing to wait.
In the eight years since Tesla’s initial promise to sell cars in India, other automakers have launched their own EVs. But the American automaker has failed to follow through, apparently because of concerns that taxes would make the cars too expensive in India, combined with the difficulties of building an Indian factory if it decided to shift production away from China.
(Unravel the complexities of our digital world on The Interface podcast, where business leaders and scientists share insights that shape tomorrow’s innovation. The Interface is also available on YouTube, Apple Podcasts and Spotify.)
After six years without a Tesla or a clear explanation about the company’s plans for India, Gondal bought an electric SUV made by 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 with $47,000 in the United States. An American can buy a new Tesla 3 for about $40,000. That’s the price of a luxury car in India, and buyers would demand excellent after-sales service.
“I think Tesla may be a great tech company. But they just don’t know how to sell luxury cars,” Gondal said.
Since then, other automakers who have been selling luxury cars in India have also started selling EVs. Hemant Suthar, a Mumbai-based director of a design studio who had also prebooked a Tesla in 2016 before finally getting his money back in 2023, said that he didn’t think the minimalistic Tesla could compete with some of the more luxurious EVs now on Indian roads.
To woo automakers like Tesla while also protecting domestic carmakers like Mahindra and Maruti Suzuki, India reduced its import duties to 15% from 70%-100% in March 2024 for EVs cheaper than $35,000 — as long the automaker commits to building a factory in the country within three years.
Despite his earlier enthusiasm, in 2019 Musk expressed concern that import duties could double prices 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 heavy Tesla obligations.”
Tesla didn’t respond to an emailed request for comment.
The EV market has changed drastically in India and elsewhere in the past five years and Tesla’s own position has evolved since it built giant factories in China, Germany and the U.S. Sales are slowing and its only new product, the Cybertruck EV, lacks much of a market outside the U.S., so global sales have fallen year over year for two straight quarters.
According to a filing to the U.S. Securities and Exchange Commission, it can build 2.3 million cars annually. Production in 2023 grew by 35% to 1.85 million cars. In the first half of 2024, Tesla sold 831,000 vehicles worldwide, far short of the more than 1.8 million for the full year that Musk had forecast.
The novelty of EVs has been wearing off, said Tu Le, founder of the consultancy Sino Auto Insights.
“What was a huge opportunity five years ago is now almost a weight around their neck,” he said.
To keep 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’re expanding overseas with both cheap and premium cars, wiping out Tesla’s first-mover advantage in a place like India.
“Every market they (Tesla) enter from now on, BYD is going to be looking at their watch and saying: What took you so long?” Tu said.
India’s growing auto market is dominated by its largest carmaker Maruti Suzuki, followed by South Korea’s Hyundai Motors and India’s Tata Motors. Electric vehicle sales doubled in 2023 but still made up just 2% of total car sales, according to market research firm Counterpoint Research. Of this, Tata Motors held more than two-thirds of the market, with Indian automaker Mahindra & Mahindra and China’s BYD shares growing.
BYD started making batteries in India in 2008. It was one of the top five EV brands in India in 2023 despite selling only two models — the six-seater e6 MPV and the Atto 3 SUV, Counterpoint said. It launched the BYD Seal in India in March 2024.
Many in India, a relatively small and crowded EV market, are skeptical about EVs. Ishan Raghav, the managing editor of the Indian car magazine autoX, said that to win over customers with an affordable EV for mass sales, Tesla would need to price its cars at a “sweet spot” of roughly $30,000.
“The only way to do that is if they build that car in India,” he said.
India says it does not restrict imports of Chinese EVs. But ties between China and India deteriorated after a military clash in July 2020, Raghav noted, and protections for domestic automakers will create other obstacles.
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 made by 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 American customers, but dealerships play a vital role in enticing customers with a luxury experience, said Matthew Degen of Cox Automotive, an American car research company.
“You go into an actual location, you meet with people, there are nice lounges. Now Tesla has showrooms, but that is different from dealerships,” he said.
Tesla also would also have to build a charging network in India, given the relatively small number of EVs already in the market.
Musk said in a July earnings conference call that Tesla is boosting capacity at its factories and that its affordable car — a small model expected to cost around $25,000 using new generation vehicle underpinnings and some features of current Tesla models — was “on track” for delivery in the first half of 2025.
The company’s plans for India remain unclear.
Rajesh Kumar Singh, a federal bureaucrat who heads the Indian agency for promoting industrial growth, said in a TV interview that the Tesla executive whom Indian officials had been talking with “got fired” and that India didn’t know what the company intended to do.
“We really don’t know,” he said.
