It is not rare to see Tesla enthusiasts from India asking CEO Elon Musk about updates on the electric car maker’s entry into the country. This is especially notable considering that some India-based EV enthusiasts have been holding on to their Model 3 deposits for several years now. Musk, for his part, has remarked that it is quite difficult to enter India as an electric car company due to local protectionist policies. But perhaps Tesla’s entry into India does not necessarily have to be driven by its electric cars. Perhaps a more viable strategy is to enter India through Tesla Energy.
Tesla’s entry in India has pretty much been in the air for years. Back in June 2017, Elon Musk noted that Tesla was “In discussions with the government of India requesting temporary relief on import penalties/restrictions until a local factory is built.” Almost a year later, Musk posted an update on Tesla’s impending India push on Twitter, stating that while the company would love to enter the country, there are some “challenging government regulations” that need to be addressed first. The CEO then stated that Tesla will be in India as soon as then CFO Deepak Ahuja, who hails from the country, believes it’s the right time.
References to India’s challenging regulations were echoed by Musk a year later, following the 2019 SpaceX Hyperloop Pod Competition. After the competition, the Avishkar Hyperloop team from IIT Madras asked Musk when Tesla will be in India. Musk reportedly responded that the company may enter the country in about a year’s time. Since then, Musk has been quite silent about Tesla’s India push, until recently, when he apologized to an EV enthusiast from the country who has held a Model 3 reservation for four years now.
Challenging regulations aside, the idea of Tesla establishing a dedicated electric vehicle factory in India may not be the optimal idea for now. As noted by Galileo Russell in a recent livestream on his Hyperchange YouTube channel, vehicle sales in India are dominated largely by two-wheeled or three-wheeled vehicles, thanks in part to the population density of the region. There is an emerging electric vehicle market in the country, but it will likely take years before it matures enough to develop a considerable electric passenger vehicle segment.
Best-selling passenger cars in India tend to be lower-priced and smaller as well, making the market very competitive. This means that Tesla, whose smallest vehicle is a premium midsize sedan in the form of the Model 3, would likely have challenges attracting the conventional Indian car buyer. The story completely changes if Tesla has a smaller, more affordable vehicle in its lineup, of course, but the release of such a car could still be a few years out.
With this in mind, does it mean that it won’t be worth it for Tesla to enter the Indian market? Absolutely not. While India may not be a very attractive market for large premium vehicles, the country is the perfect place to ramp an energy business that’s focused on solar panels and battery storage. Fortunately, Tesla actually has an Energy department that fits this bill, and the company is hard at work in ramping it up. Tesla Energy could then be the perfect entry point in India, on account of the country’s push towards sustainability. India’s power grid is known for its areas of improvement as well, making it a good fit for Tesla’s battery storage solutions.
Provided that Tesla Energy could price its solar panels and battery storage devices competitively, the company could have a good shot at making an impact in the Indian market. Tesla already prices its solar solutions in the United States very aggressively, and with a dedicated facility in India (perhaps a Gigafactory India is in order?), the company could take over a good portion of the country’s residential and commercial market. Such would go hand in hand with Tesla’s next-generation batteries as well, which are expected to be cheaper to produce and far more durable and high powered compared to their predecessors.
