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in Mobility

India: Tesla opens, BYD faces challenges

energynewsbyenergynews
Thu 3 August 2023
Reading Time: 3 mins read
India: Tesla opens, BYD faces challenges
Electric Market Dynamics in India: Tesla Enthusiastic, BYD Facing Regulatory and Competitive Challenges. Contrasting perspectives on Tesla's entry and BYD's difficulties in the world's third-largest automotive market, with a focus on negotiations, safety investigations and the implications of Chinese investment.
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Tesla has received a warm welcome from India for its proposal to invest in the country. While its biggest rival in electric vehicles, China’s BYD, was stopped cold by increased scrutiny in New Delhi.

Tesla and BYD in India: Contrasting discussions

The result could be an opening for Tesla to negotiate terms for entry into the world’s third largest car market without the competitive threat of BYD it faces in other emerging markets, such as Thailand.

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“The future of who wins in India will have some impact on who wins worldwide in the electric vehicle race,” said Jasmeet Khurana of the World Economic Forum.

Since a meeting between Musk and Indian Prime Minister Narendra Modi in June in New York, Tesla has accelerated closed-door discussions with Indian officials about a potential investment in the factory and plans to build a new low-cost $24,000 EV. These discussions have continued over the past week, with Tesla discussing the details of its plans to access India’s fast-growing electric vehicle market, and Modi personally monitoring developments, sources said.

These meetings, however, were kept strictly secret, with officials posting no photos on social media of handshakes with executives that is otherwise business as usual after high-level meetings. Meanwhile, BYD seems to be taking a back seat. Months after seeking approval for its own $1 billion investment in India, BYD is no longer keen to pursue approval, Reuters reported.

Safety and Taxes : Investigating BYD in India

In another setback, BYD is facing an investigation into allegations that it underpaid import tax in India. Among other concerns, Indian officials are worried about the national security implications of Chinese-made vehicles and the data they could collect. India is “uncomfortable with Chinese automakers”, said one official.

Although all investment from China has been subject to enhanced approval requirements in India since a border dispute between the two countries in 2020, there could be a disproportionate effect on India’s developing electric vehicle market due to China’s dominance in battery materials, battery production and other technologies.

Tesla also has Chinese suppliers who have helped it cut production costs at its Shanghai plant, and it now wants to bring them to India – where it seems to have the upper hand in talks with New Delhi. India has told Tesla that it will allow its Chinese suppliers into the country if they forge partnerships with local companies, just as Apple has done.

India’s hesitations about BYD: Implications for Chinese investment

But at the same time, India is hesitant about BYD’s $1 billion plan, even though this too has been proposed as a partnership with a domestic engineering firm.

The Global Times, a Chinese state-owned newspaper, said the reported pushback on BYD’s investment plan “will lead to a chain reaction and deal a blow to Chinese companies’ overall confidence in investing in India.”

BYD did not respond to requests for comment on the status of its investment plan in India or on the import tax request. In a statement to Reuters, the company noted that it had been active in the Indian market for 16 years, selling commercial vehicles and passenger cars. Tesla did not respond to a request for comment on its talks with the Indian authorities.

Musk had said in June that Modi was “pushing us to make significant investments in India, which we intend to do.”

Tesla wants to sell 20 million cars worldwide by 2030, up from 1.31 million in 2022, but faces obstacles to expanding its Shanghai factory. BYD was the world’s leading seller of EVs and plug-in hybrids in 2022, with a total of 1.86 million units – the vast majority in China. It is ahead of Tesla in terms of sales of all-electric cars.

“Tesla sees competition mainly with BYD, and both are growing globally at high speed,” said Gaurav Vangaal of S&P Global Mobility.

“If they want volumes, they have to come to India,” he said.

Tata Motors leads India’s emerging electric vehicle market

Adding that with the government encouraging companies to build electric vehicles locally, India can also serve as an export base.

India’s annual production of light electric vehicles is expected to reach 1.4 million by 2030, or nearly 19% of the total projected production of 7.25 million, according to S&P Global Mobility estimates. It was less than 50,000 in 2022. The nascent electric vehicle market in India is dominated by local player Tata Motors, whose best-selling Nexon EV sells for up to $19,000, while Chinese manufacturer MG Motor ZS EV starts at $28,000, while BYD’s Atto 3 sells for around $41,000 in India.

Toyota Motor, Hyundai Motor and Kia all sell mid-size gasoline-powered SUVs priced at around $24,000, the entry point identified by Tesla. Tesla does not currently sell vehicles in India.

“Tesla has become a coveted product because of its name alone,” said Sam Fiorani of AutoForecast Solutions.

“Add to that an affordable product tailored to the Indian market and with the potential to be a local success.”

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