Tesla’s India entry unlikely to impact Maruti Suzuki, Hyundai, or Tata Motors: CLSA

Tesla’s anticipated entry into the Indian market has been generating significant buzz, with many speculating its potential impact on domestic carmakers. However, according to a CLSA report dated February 21, 2025, Tesla’s presence is likely to drive the premiumisation of India’s car market rather than disrupt the dominance of established Indian manufacturers like Maruti Suzuki, Tata Motors, Hyundai, and Mahindra & Mahindra (M&M).

Tesla, which sold 1.8 million units globally in CY24, has its biggest markets in China (40% of total sales) and the US (35%), both of which have significantly higher battery electric vehicle (BEV) penetration than India. The report highlights that Tesla’s cheapest US model retails at approximately $35,000 (~₹29 lakh), making it a premium offering in India, where the average selling price (ASP) of cars is around $14,000 (~₹11.6 lakh) and BEV penetration stands at just 2.4%.

Tesla faces a high import duty structure in India, with a 110% duty on cars priced above $40,000 and 60% for models under $40,000. While India has proposed duty cuts under the E-Vehicle policy, CLSA estimates Tesla would still need to invest ₹4,100 crore ($541 million) to set up a local factory and produce at least 8,000 units per year to benefit from lower duties.

Despite the excitement around Tesla’s entry, CLSA remains skeptical of any immediate competitive impact on local carmakers. Even if Tesla manages to introduce a lower-priced model in the ₹25 lakh range, the report suggests that Mahindra & Mahindra, Tata Motors, and Hyundai are already aggressively pricing their EV offerings in this segment.

Moreover, Tesla’s pricing even after import duty cuts would likely remain 20-50% higher than the most popular Indian EVs like MG ZS EV, Hyundai Kona, Tata Nexon EV, and Mahindra XUV.e series. The report argues that factors such as spacious interiors, better resale value, established dealership networks, and higher affordability will continue to favor domestic manufacturers.

Compared to China (~30% EV penetration) and the US (~9.5%), India’s BEV penetration is just 2.4%. Even with government incentives, cost reductions, and a growing EV infrastructure, CLSA estimates BEV penetration will rise only to 6% by FY28 and 2.5% by FY30. Assuming Tesla captures 10-20% of India’s BEV market, its overall share in the Indian car market would still be less than 2%.

CLSA maintains that Tesla’s new model would still fall into the ₹35 lakh segment despite tariff cuts, making it uncompetitive in the price-sensitive Indian market. While Tesla may eventually introduce a sub-₹25 lakh model, the report suggests that it will likely compromise on specifications and features to meet the price expectations of Indian consumers.

Additionally, Indian automakers are expected to offer better value propositions through localized production, supply chain efficiencies, and cost advantages. Models from Maruti Suzuki, Hyundai, Tata Motors, and Mahindra are likely to remain more attractive to Indian buyers, even in the EV space.

Despite the hype, CLSA’s analysis does not see Tesla posing a major threat to Indian automakers in the near future. The high costs of import duties, local manufacturing requirements, and Tesla’s premium positioning make it unlikely that the company will achieve significant market penetration anytime soon. Mahindra & Mahindra, Tata Motors, and Hyundai remain well-positioned to retain their market dominance, with little risk of disruption from Tesla’s India entry.

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