Tesla Motors’s Entry in India is a golden opportunity for the Indian Automakers
Enter: the Aspirational Model, for the first time!
Let’s start with the information we have at hand: India’s transport minister, Nitin Gadkari, announced that Elon Musk’s electric car company will start selling EVs in India from 2021. Although, Tesla Motors or Elon Musk has not given any comment on the same.
It could be all merely speculation like in 2016 or 2018. Until Tesla Motors does enter the Indian market, the domestic automakers can lever the opportunity to tap into the automobile goldmine.
Let’s talk about Tesla Motors & the Indian automobile market first.
History
In 2016, Tesla started taking pre-orders for Model 3, its flagship vehicle, in various global markets, including India. Fans of Tesla (aspirational model) in India paid the token amount of $1,000 which is 6.5 times India’s per capita income/yr(market & opportunity) just to pre-order Model 3.
In 2018, Tesla Motors’s CEO Elon Musk blamed local regulations, which required automakers to source 30% of the parts domestically, owing to which the automaker failed to make its debut in the nation.
Why Tesla Motors Could Surpass Veteran Indian Automakers?
I. Opportunity & Affordability
India is perceived as a poor & developing country across the world. Even though if it is true in a certain frame of reference, there is another angle at play.
1. Breaking the Stereotype
India is host to 104 billionaires ranking 4th in the world index. India also boasts 21 unicorn businesses, fourth in the world to the United States(265) & China(204) and the United Kingdom(24) which are all super developed countries in comparison to India.
Hence, the affordability of electric cars is out of the equation, making way for the opportunity to market EVs at premium prices.
2. Democratising Access: Beyond Cities
The urbanisation in India is local to metropolitans and mega-cities whereas the second and third-tier cities are grossly undermined. Maruti Suzuki built its entire automobile distribution strategy on these pillars. When the sales of every manufacturer dipped in the country, Maruti Suzuki soared.
Tesla Motors does not intend to penetrate these markets in the start, but they definitely should look into it after monetising metros. Why?
The remote areas already pose scarcity of gasoline pumps, it presents an opportunity to convert the audience towards electric from the start since the capital isn’t a concern in 2nd tier cities.
3. The Direct to Consumer Model
The current automobile manufacturers in India operate dealerships & franchise based dealerships for sales. It does give a facade benefit helping in creating experiential value to consumers but it leads to added costs.
The buying behaviour of high-value commodities over the internet in India has slowly been growing. It started with mobile phones from Apple where people bought mobile phones worth over 1 lakh INR from e-commerce websites. The upcoming generations of millennials and Gen-Z are largely dependent on e-commerce to make most of the purchases.
The DTC model does have its benefits in saving costs and controlling the supply chain & customer experience, but the buying behaviour of the target audience needs to be taken into consideration for EV.
The brand value goes a long way in purchasing over the internet bringing me to the next point where Tesla Motors will trump other automotive manufacturers in India.
II. Aspirational Model & Indian Market
1.Tesla’s Aspiration Model over Climate Change
EV might be a conscious choice in the automobile market of countries like Belgium but Tesla Motors has emerged as an aspirational brand, mainly due to association with Elon Musk.
Strategically the business had planned the brand, it was no coincidence that 2006 had roadster & 2018 had Model 3 in the supply chain of Tesla.
Tesla’s Master plan to build an aspirational brand
Coming to the Indian market, the development of any genre has always been carried from west to east. Everything from films, fashion, art to technology has been an aspirational dosage of the west in the developing eastern countries.
Tesla never championed climate change through its messaging because it doesn’t work, rather, the business was smart to introduce Tesla Motors as an alternative automobile, democratising access from Roadsters to Model 3(detailed in the above-linked essay).
2. Indian Automobile Market & Positioning
Now, India has already seen automotive veterans such as Mahindra and Tata launch their electric vehicles which did not deliver great returns. Let me put things in perspective: In 2020, the top 5 EV sales combined were 1408 with Tata Nexon leading the charge at 848 EVs.
The trend of EVs is catching up. When the millennials and GenZ only wanted to hail Ubers to work, the rising EV market can change that. It is the perfect time for Indian automobile manufacturers to act but there is a major hole to fill.
Tesla Motors is an aspirational brand built on Elon Musk’s reputation, it wouldn’t be a challenge for the brand to build a cult-classic following. The Indian automakers lack the brand value required to capture the market.
Maruti Suzuki, Indian automobile’s highest market shareholder(53%) has built its reputation on budget cars, service and mileage leading to “trust” as the emotional resonance for the automaker.
Electric vehicles are futuristic and would cater to a different audience. The challenge for automakers is to build marketing efforts to resonate with the desired audience. Positioning would be the differentiator in the upcoming years for the Indian automobile market.
Safety
No one talks about vehicle safety and crash tests, at least in the Indian automobile market. The lower versions of cars in the market do not even have AirBags which is devastating. Only 3 cars: Tata Nexon and Altroz, Mahindra XUV 300 have 5 star NCAP rating only for driving seat.
No, they are not electric.
Whereas, on the other end of the spectrum, Tesla has consistently scored 5 stars at the NCAP test.
Safety of vehicles is going to be a huge quotient in the upcoming years due to the introduction of autonomous driving. The resonance to “safety” is already owned by Volkswagon, hence it should be a given for any automobile maker to build cars which score 5 at NACP ratings.
Also, Model 3 of Tesla comes with a semi-autonomous feature, although I hardly think it would work in Indian roads as of now. It can definitely be a foundation for autonomous vehicles in India.
Conclusion
India is the 4th largest automobile market in the world. The EV market is still very new and upcoming.
Tesla Motors is set to Kick Off Model 3 in the Indian Market in 2021 with sales first approach. The plan is to understand & gauge the market before deep diving with manufacturing in the country.
I believe Tesla entering the Indian market would accelerate the EV market by more than 10 years. It would encourage competition and push the Indian automobile market to build better cars.
Also, the acceptance of EVs from Tesla’s global operations would transfer to the Indian market, saving efforts and time for Indian automakers to build affluence in the minds of the consumer for electric cars.