Is India the next frontier for Tesla?

The auto industry is fixated on China these days, not only because of its rapidly growing market, but also for its rapid electrification, enforced by ever-stricter government measures. Chinese cities are ordering electric buses in lots of 5,000, and well-funded startups building electric “supercars” are rolling out big plans. However, there’s another sleeping giant in Asia that could become a huge market for electric vehicles and renewable energy products in the years to come.

Above: Tesla's CEO Elon Musk shakes hands with India's Prime Minister Narendra Modi during his visit to the Tesla factory in 2015 (Image: Gossipkatta)

Tesla has confirmed that it plans to introduce its vehicles to India this summer. Back in March, when Model 3 was unveiled, Elon Musk said that pre-orders for the new semi-autonomous electric vehicle would be available in India and other future markets. However, on the face of it, the Subcontinent will surely be a tough nut for Tesla to crack.

Above: NTPC, India's state owned energy company, has plans in place to establish electric vehicle charging stations across the nation (Source: OnCars)

Few Indians can afford a Model S or X, and even the 3, at a price point of $35,000, is not likely to be considered cheap in a country where many get around on 3-wheeled tuk-tuks and scooters. Implementing Tesla’s Autopilot features may prove problematic, considering the poor quality and ever-changing conditions of many Indian roads. And charging infrastructure will have to be built almost from scratch.

Above: Nitin Gadkari, India’s Transport and Highways Minister, visited Tesla and asked the company to make India its Asia manufacturing hub (Source: Indian Express)

However, EVs may get a big boost from the Indian government soon. A recent report from the National Institution for Transforming India (aka NITI Aayog), a government think tank, has recommended a bold strategy to electrify all vehicles in the country by 2032, and government and industry sources expect it to strongly influence government policy. “India Leaps Ahead: Transformative Mobility Solutions for All” is a very forward-looking document, calling for India to leapfrog past hybrids to fully electric vehicles, and promoting state-of-the-art concepts such as mobility as a service and vehicle/grid integration. It suggests using tax revenues from the sale of legacy vehicles to finance charging infrastructure, and calls on the government to open a battery plant by the end of 2018.

Above: India has aggressive plans to sell only electric cars by 2030 (Source: Bloomberg)

Could that battery plant be a Tesla Gigafactory? That seed was planted when Prime Minister Narendra Modi paid a visit to Tesla’s facilities in 2015. Since then, India’s Transport and Highways Minister, Nitin Gadkari, has taken the tour, and so have envoys from three different Indian states, who presumably each presented their pitch for a manufacturing plant.

Above: Last fall, news broke that three states in India were in discussions with Tesla about a new Gigafactory in the country (Youtube: CNBC-TV18)

India is also planning major progress on the renewable energy front. The latest to visit Palo Alto was Chief Minister N. Chandrababu Naidu, who discussed Tesla’s partnership with the state of Andhra Pradesh to set up regional smart grids, supported by Tesla Energy products. “The collaboration with Tesla is going to herald a revolution in the Indian energy sector,” said Mr. Naidu. “Through installing solar panels on house tops, we can utilize solar energy for residential needs and also as energy for running cars for which the [battery] storage technology will be provided by Tesla. We will provide energy to agriculture pump sets in the first stage. In the second stage, we will focus on solar energy generation and its storage, which will change the entire power scenario in the country.”

Above: India's Prime Minister Narendra Modi has stated that solar power is the “ultimate solution to India’s energy problem” (Source: The Economist)

Not everyone is happy about the developments in Asia. At the recent Asia Oil & Gas Conference, the Indian government’s bold proposals, as well as China’s latest “road map,” which calls for new energy vehicles to account for 20% of annual vehicle sales by 2025, were on the agenda. Any shrinkage of the Asian cash cow would be a devastating blow for the global oil industry. China buys over 2 million new cars per month, and is hot on the heels of the US as the world’s biggest oil consumer. India is the world’s third-biggest oil importer.

Above: Elon Musk shows India's Prime Minister Narendra Modi Tesla Energy products including residential energy storage via its Powerwall (Image: Economic Times)

“The choices made by China and India are obviously most relevant for the possible future peak in passenger car oil demand,” a spokesman for the International Energy Agency told Reuters. Even oil industry execs are acknowledging that oil demand may peak much earlier than expected. “Technology is moving fast. In 10-15 years... our gasoline market might not be the same as it is today,” said Dawood Nassif, Board Director at the state-owned Bahrain Petroleum Company.