Enticing Overtures: India and China are angling for Tesla
The Asian market represents a massive market opportunity for Tesla Motors [NASDAQ: TSLA]. According to CleanTechnica, HSBC Global Research published its Asia Equity Strategy Report which notes that electric vehicles [EVs] could make up 35% of new car sales in Asia by 2040. China’s aggressive subsidisation program, for example, based on a target of 5 million electric cars on the road by 2020, is expected to have a positive knock-on effect for the entire EV ecosystem. And, India’s Road Minister says they will have 100 percent electric vehicles by 2030 to become the first “100 percent electric vehicle nation.” That said, both countries, India and China, have recently sent some positive signals to Tesla Motors as CEO Elon Musk continues to evaluate a possible manufacturing facility in the region.
Last week, according to the Indian Express, overtures were made: "Urging US-based electric car major Tesla to make India its Asia manufacturing hub, [as] Union Minister Nitin Gadkari has offered it land near major Indian ports to facilitate exports to South and South East Asian countries... [and] he enquired about the [Tesla] battery packs that can store energy from the power grid and from solar panels, the statement said, adding Gadkari was told that Tesla was inviting suggestions for locations in India for demonstrations."
Gadkari commented further in India's Economic Times: "They [Tesla] are positive on setting up a base in India but will only decide on it after their Model 3 car is launched... We have offered them (support) to make India their Asia manufacturing hub... [and] we also want Tesla to manufacture commercial vehicles." In addition, the government in India is already in the process of rolling out the National Electric Mobility Mission Plan, which aims to get 6 million electric vehicles on the road by 2020. Discussing Tesla Energy, Gadkari commented, "They (Tesla) have path-breaking energy storage technology, I told them that India could be one of their largest markets and we would be the most cost effective."
In China, barriers to entry were previously in place that would have forced Tesla to forge a joint venture with a local Chinese company in order to set up a manufacturing facility in the country. In a surprising turn of events this week, according to Investors Business Daily, "Chinese officials have reportedly waived the requirement for some electric vehicle makers to form joint ventures with Chinese companies before operating in that country... The development could aid Tesla, which opened its first China showroom in Beijing in 2014 and is reportedly searching for a Chinese manufacturing site. Local production would allow Tesla to avoid China's 25% import duty -- and might open the door to various government subsidies."
During the 2016 first quarter earnings call, Tesla CEO Elon Musk admitted, "at some point its going to make sense... to do localized production on a continent basis." Furthermore, rumors were floated (but denied) last month when Bloomberg reported, "Shanghai had emerged as the front-runner to become the production base for Tesla Motors Inc. in China." And Tesla has been accelerating its charging infrastructure in the region. Last month, according to Electrek, "Tesla inaugurated its 100th Supercharger in China."
These two markets, India and China, represent an enormous opportunity for Tesla. Not only are they both intent on expanding their efforts to support electric vehicle growth, they each represent major automotive markets worldwide. As evidenced above, although India is the fifth largest market in year-over-year sales (2014 to 2015), it's the #1 fastest growing market globally. Needless to say, China's car sales overall were staggering with 18.68 million new cars sold and leads as the world's biggest auto market (by sales volume) worldwide. If Tesla can crack these two markets effectively in the coming decade, it could mean significant growth for the company.