Tesla's long-awaited entrance into India is now just months away. Elon Musk has already confirmed the entry of Tesla to India. However, things are not as smooth as we wold expect from the largest electric car maker.
Despite India being a strategically important market for Tesla, the company is facing a few major hurdles that have dampened its launch plans in the fifth-largest car market.
India has the world's highest car taxes. It comprises a 28 percent Goods and Services Tax (GST) and other levies ranging from 3% to 22%. At the moment, car taxes may be as high as 50%.
In places like New Delhi, electric vehicle subsidies do exist, but they aren't enough to make Tesla's vehicles affordable to a larger population.
High taxes deter demand, making it less likely for makers to pass on cost savings to consumers. For foreign companies, this has proven disastrous, and Tesla may be next in line.
According to Toyota, India's high taxes may force the company to stop future expansion in India. Harley-Davidson reportedly chose to leave the market months ago due to high taxes.
Additionally, three years ago, General Motors also shut shops in India. Ford has also wrapped up its manufacturing in India after a lot of deliberation.
Indian car makers such as Maruti Suzuki dominate the Indian market for internal combustion engine cars. Maruti Suzuki has a 54 percent market share as of December 2018.
The other two major companies are Tata Motors and Mahindra & Mahindra. Already, signs indicate that this trend will repeat in the electric vehicle industry. Tata Motors has a 62 percent market share in the electric vehicle industry in the first quarter of the financial year 2020-2021.
Low Ground Clearance
In its testing in India, Tesla has found that Tesla Model 3 is scraping its belly on majority of speed breaker and pot holes due to lower ground clearance of 140 mm. It means, it will have to increase its ground clearance by at least 25 mm to make Model 3 fit to drive on Indian roads.
Tesla is hoping government should reduce taxes on the import of electric vehicle to make them more affordable for the Indian market. However, the government has remained silent on this matter as of now.