HANOI, Vietnam — In April 2016, Elon Musk invited Indians to pre-order the upcoming Tesla Model 3. Vishal Gondal was one of the first to sign up, paying a $1,000 deposit for a car that never arrived.
Gondal, founder and CEO of a health-tech startup called GOQii in India’s financial capital Mumbai, wasn’t sure when the automaker would launch in India or how much the car would ultimately cost. But the Elon Musk fan was excited about the Model 3 and willing to wait.
In the eight years since Tesla first promised to sell cars in India, other automakers have also launched their own electric cars. But the American carmaker has not kept its promise, apparently out of concern that taxes would make the cars too expensive in India. In addition, it would be difficult to build a factory in India if it decided to move production out of China.
After six years without Tesla and with no clear explanation about the company’s plans for India, Gondal bought an electric SUV from German automaker Audi. He got his $1,000 back in January 2023 with the help of a friend who helped him track down a Tesla sales manager in India.
India is the third largest auto market in the world after China and the US. But it is unique. The average price of cars sold in India in 2023 was $14,000, compared to $47,000 in the US. An American can buy a new Tesla 3 for about $40,000. That is the price of a luxury car in India, and buyers would demand excellent after-sales service.
“I think Tesla may be a great technology company. But they just don’t know how to sell luxury cars,” Gondal said.
Since then, other automakers that sell luxury cars in India have also started selling electric vehicles. Hemant Suthar, a Mumbai-based head of a design studio who also pre-ordered a Tesla in 2016 before finally getting his money back in 2023, said he doesn’t think the minimalist Tesla can compete with some of the more luxurious electric vehicles currently on India’s roads.
To attract automakers like Tesla while protecting domestic carmakers like Mahindra and Maruti Suzuki, India in March 2024 cut its import tariff on electric vehicles under $35,000 from 70-100 percent to 15 percent – provided the automaker commits to building a factory in the country within three years.
Despite his earlier enthusiasm, Musk expressed concern in 2019 that import tariffs could double the price of Teslas made in India and make them “unaffordable.” Many in India expected Musk to announce plans for a factory there in April, but he canceled a planned trip at the last minute, citing “very high commitments to Tesla.”
Tesla did not respond to an emailed request for comment.
The electric vehicle market has changed dramatically in India and elsewhere over the past five years, and Tesla’s own position has evolved since it built huge factories in China, Germany and the U.S. Sales are falling and there is no big market outside the U.S. for the company’s only new product, the Cybertruck EV, so global sales have fallen year-on-year for two consecutive quarters.
According to a filing with the U.S. Securities and Exchange Commission (SEC), Tesla can build 2.3 million cars annually. Production in 2023 increased by 35% to 1.85 million cars. In the first half of 2024, Tesla sold 831,000 vehicles worldwide, far less than the more than 1.8 million Musk forecast for the full year.
The appeal of electric vehicles is waning, says Tu Le, founder of consulting firm Sino Auto Insights.
“What was a huge opportunity five years ago is now almost a burden for them,” he said.
To maintain its leading position among global automakers, Tesla needs new, more affordable cars for emerging markets like India, Tu said. Even a $25,000 car is uncompetitive in China given the dominance of Chinese electric carmakers like BYD. They are expanding abroad with both low-cost and premium cars, eroding Tesla’s first-mover advantage in a country like India.
“In every market Tesla enters from now on, BYD will look at the clock and say, ‘What took you so long?'” Tu said.
India’s growing auto market is dominated by its largest automaker Maruti Suzuki, followed by Hyundai Motors of South Korea and Tata Motors of India. According to market research firm Counterpoint Research, sales of electric vehicles doubled in 2023 but still accounted for only 2% of total auto sales. Of these, Tata Motors held more than two-thirds of the market, while Indian automaker Mahindra and Shares of Mahindra and China’s BYD are growing.
BYD started battery production in India in 2008. According to Counterpoint, the company was one of the top five electric car brands in India in 2023, despite selling only two models – the six-seater MPV e6 and the SUV Atto 3. In March 2024, the BYD Seal was launched in India.
Many in India, a relatively small and crowded market for electric cars, are skeptical about electric cars. Ishan Raghav, editor-in-chief of Indian auto magazine autoX, said that to attract customers with an affordable electric car for mass sales, Tesla would need to price its cars at a “sweet spot” of about $30,000.
“That’s only possible if they build the car in India,” he said.
India claims it does not restrict imports of Chinese electric cars. But China-India relations have soured following a military clash in July 2020, Raghav noted, and protecting domestic automakers will create further obstacles.
Even if Tesla were to sell cars in India after agreeing to build a factory within three years, most imported Teslas would be sold at the price of luxury cars from established manufacturers like Mercedes Benz and Audi. These automakers have been in India for decades and already have an extensive dealer and service network.
Although Tesla sold its cars directly to American customers, dealers played a crucial role in attracting customers with a luxury experience, said Matthew Degen of Cox Automotive, an American automotive research firm.
“You go to a real location, meet people, there are nice lounges. Tesla has showrooms, but that’s different from car dealerships,” he said.
Given the relatively small number of electric vehicles already on the market, Tesla would also need to build a charging station network in India.
Musk said in a July quarterly earnings call that Tesla was increasing the capacity of its factories and that its affordable car – a small model expected to cost around $25,000 and based on a new-generation vehicle base and some features from current Tesla models – was “on track” for deliveries in the first half of 2025.
The company’s plans for India remain unclear.
Rajesh Kumar Singh, a federal official who heads India’s Industrial Growth Agency, said in a television interview that the Tesla executive Indian officials had spoken to had been “fired” and that India did not know what the company was planning.
“We really don’t know,” he said.
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