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US automaker Tesla’s entry into India last week is an unpleasant reminder about how India keeps missing the manufacturing bus, again and again.
This time, we’ve lost the race to produce and consume Electric Vehicles (EV), yet again, to China and the US. What makes the loss even more agonising is that, like China, India too started its EV journey pretty much at the same time around 2015. A decade later, or what now seems like between sundown and sunrise, China emerged as the leading EV market. Its conveyor belts simply seem unstoppable, while India stands still.
Consider some more enviable statistics. China’s annual EV sales rose from just 2,344 units in 2015 to a staggering 1.7 million in 2024. Over 50% of new cars sold were electric models in 2024 and it currently has over 41.3 million EVs on road. As many as 300 companies are manufacturing EVs there and four of the world’s top 10 EVs sold worldwide are from China.
In contrast, India has just a handful of producers. Total registered EVs stood at about 2 million as on 2024, accounting for 7.5% of India’s total vehicle sales. But electric two-wheelers lead the pack, comprising 60% of total EV sales. The good news is India is expected to have an estimated 50 million EVs on the road by 2030, but then, China would have scaled another unbeatable milestone by then.
In short, India is still warming up to the idea of large-scale EV adoption, while China is out to get another bite of meat, this time from global markets as it moves to the next stage of the consumption value chain.
One of the reasons for such aggressive adoption of China-made EVs is the significant state-sponsored subsidies for consumers, and the availability of adequate charging infrastructure. India lacks both the charging infrastructure and suitable incentives.
What’s concerning now is how Beijing is flooding the global markets with its low-priced electric cars. China has subsidised EVs since 2009, but those incentives were phased out officially in 2022. Market watchers, however, believe that Beijing is artificially keeping prices low, as local governments are continuing to offer cash subsidies.
Take for instance, the pricing of China’s MG Motors and BYD, which are on par with Indian models, notwithstanding the high import tariffs of about 70%-100%. This has been the case with other markets too, which is why, the European Union recently opened an anti-subsidy investigation against China to know if it’s gaming the pricing structure with unofficial state-sponsored incentives.
Now, in this backdrop, the one thing that’s upsetting about Tesla’s much-awaited India foray is its seemingly half-hearted interest to tap India, touted to emerge as the world’s third largest auto market.
Moreover, the US automaker is grappling with excess capacity and declining sales, while China’s BYD is at a threatening distance of dethroning Tesla as the world’s largest EV maker. Given the circumstances, a large growing market like India offer a promising opportunity, but Tesla isn’t as excited.
Its India foray was low key and marked by the absence of its celebrated founder Elon Musk. This is quite different from other large MNCs like Apple, Microsoft, Amazon and Google, which saw the respective billionaire bosses descending down on India to script history.
Besides, Tesla’s limited number of model launches and their pricing at over Rs 60 lakh each also makes its India journey uninspiring. Currently, Tesla imports fully assembled vehicles into India, which are subject to import duties as high as 70% to 100% if the car’s cost, insurance, freight value exceeds $35,000.
That said, India does offer attractive tariff rates of just 15% for willing companies under its EV policy launched last year. But to avail these lower tariffs, companies have to invest at least half-a-billion dollars in local production. The policy also sets a three-year timeline to set up manufacturing facilities and starting commercial production, with a goal of achieving 50% domestic value addition within five years.
Besides, to ensure the progress of domestic manufacturing ecosystem, the government also opened another lifeline via its Production-Linked Incentive scheme, encouraging foreign auto companies to localise production. Then there’s the other flagship scheme Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME), which too offers the much needed impetus to EV sales with state governments chipping in.
It’s not that India lacks the scale and strategic depth to emerge as a global leader in the automotive value chain. In 2022, India overtook Germany to emerge as the world’s fourth largest automotive market and is set to reach a record 50 lakh units in the next few years. The automobile market contributes nearly 7% to the GDP, and the EV market in India is expected to touch $48.6 billion, creating 50 million direct and indirect jobs.
But one reason that’s deterring potential buyers and therefore prospective manufacturers is that fast-charging solutions remain scarce. Currently, India has only one public charging station per 135 EVs, significantly lower than the global average of one station for every 6-20 EVs, according to CareEdge research report.
As per estimates, India now has over 12,000 public EV-charging stations and needs at least 1.3 million charging stations by 2030. Recognising the need, the government is also prioritising charging infrastructure. Among the notable initiatives are the setting up of 72,000 public charging stations with an investment of Rs 2,000 crore across the country by 2026.
Above all, India imports over 90% of the EV batteries, which makes the end product expensive and also remains vulnerable to supply shocks. The question is, if and how the government will overcome these multiple challenges to restart the EV journey.
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