Elon Musk’s Tesla entering India markets has been one of the most talked about topic in the automotive industry. Recently there have been some reports of PM Modi keen about him setting up plant in India. However, so far in the absence of any such concrete plans, most analysts believe that Tesla’s India foray is unlikely to shake up the local automotive majors. They explained that even the cheapest Tesla model could be rather expensive, especially after import duties. This is one of the key reasons why most prefer local EV plays like M&M over Tesla. The M&M share price has been buzzing on the back of these upgrades.
Tesla’s India entry: CLSA says no big challenge for M&M, Tata Motors, Maruti Suzuki, Hyundai
CLSA believes that Tesla is unlikely to pose any significant challenge for Indian automotive majors, especially the mass market players like Maruti Suzuki, Hyundai, Tata Motors, and Mahindra & Mahindra in the near term. According to CLSA, the cheapest Tesla models would cost Rs 29 lakh approximately ($35,000) while the average price for most mass market cars are around Rs 11 lakh ($14,000). According to the brokerage houses, direct import is also unviable beacuse of the high duties- 110% for cars above $40,000 and 60% for those below $40,000.
Even if the duty on imports comes down by 15-205, the on-road price for Tesla’s Model 3 would be upwards of Rs 35 lakh. This CLSA notes would be 20-50% higher than the likes of Mahindra XUV 9e, Hyundai e-Creta and Maruti Suzuki e-Vitara.
Tesla’s India entry: Jefferies says right time to buy M&M
Jefferies to corroborates the views and sees limited impact for Indian auto majors from Tesla. The reasons include large gap in existing portfolio prices, lack of visibility on Tesla’s plans to establish local manufacturing, supply chain, charging and distribution, and EVs comprising of just 3-5% of the total volumes for key auto players like M&M. They consider the pricing of current Tesla models and import duty as key factors. According to them, even the top variants of BE-6 and XEV-9E would cost about 30-50% less than Tesla’s product offerings. The cheapest in the portfolio would cost about Rs 42 lakh with 15% import duty. They believe this is the right time to Buy M&M and have a target price of Rs 4,075 per share on the stock.
Tesla’s India entry: M&M is Nomura’s top pick in auto
Nomura rules out the possibility of Tesla launching a vehicles that can be priced as low as Rs 21 lakh. They rationalosed that even in relatively low-cost markets like China, their offerings like the Model 3 starts at $32,000 and these do not qualify for lower duties in the Indian market. If Tesla, as news reports indicate, imports vehicles from Germany, it is unlikely to impact key Indian OEMs like Tata Motors and M&M. Nomura has a Buy rating on both these stocks and prefer M&M as top pick. They believe Indian OEMs have “built strong competencies over the years and have demonstrated market share gains across segments Vs global competitors. One reason for their success has been their ability to understand consumer trends and adapt faster with lower development costs.”
Tesla’s India entry: Advantage local OEMs says BNP Paribas
BNP Paribas expects Tesla’s India entry to be slow and measured, given the low average price point in the market. Even they believe the pricing is a major concern and puts Tesla at at disadvantage against other mass market players in the Indian automotive place. They also added that, “We expect Tesla to address India by exporting from one of its existing plants. This would limit volumes to very low levels for the foreseeable future.”
Govt push for EVs
Most brokerages also pointed out that the Govt push promoting EV usage will also help local EV makers like M&M. However, some analysts pointed out that seamless execution, product quality and smooth software experience are some of the key aspects that Indian automakers should pay attention to. Meanwhile, the street is also monitoring the possibilities of China’s BYD manufacturing in India. Currently there are no plans as such.