On the offset I am very hopeful of getting my long awaiting Tesla (reserved in April 2016) this year. Hoping that Model Y is also introduced with Model 3.
It has been a breathtaking year for Tesla in spite of the troubled times the world has seen due to the pandemic. For me personally it's been amazing to see both Tesla and $TSLA grow. Tesla, the company seems so much more mature now, especially with execution. It's still agile wrt product development and manufacturing timelines.
The recent indications from Elon, regarding a goal of 20 million Teslas produced per year by 2030 is very ambitious and inspiring to see. What I am hoping for is India playing a big part in this.
The usual arguments against India / Indian market is that the addressable market for Tesla is too small FOR NOW . This is true to a certain extent, but the most important part is the "for now " part. No one expects Tesla to sell in hundreds of thousands with the current product portfolio. Tesla also has very ambitious goals for its energy generation, storage and distribution products/services. The automobiles business and the energy generation, storage and distribution products/services are the two main business verticals that Tesla will have for the Indian market. Lets deep dive into both :-
Tesla Indian Automobiles Vertical:
STAGE 1: CBU Imports of SR+
Tesla currently intends to enter India to begin with imports of CBU (Completely Built Up) units. As I understand the catch here is that there is no distinction between an ICE CBU import and an EV CBU import. Hence the import duty for a car of value less than $40,000 is 60%. The only feasible model is MODEL 3 SR+ if the price is to be kept below $100,000.
Let's consider 2 scenarios for this :-
1. SR+ is imported as a CBU as is and the car with Basic Autopilot software included. Then the approximate cost to customer excluding insurance will be as follows:-
(others include some % of social welfare surcharge & some other costs I maybe unaware of, can be higher as its just rough calculations.)
2. What Tesla might be able to do is bifurcate basic autopilot cost and the car cost (hardware) . Software cost can be reduced in the CIF price (which is considered for import duty). This will help save some on import duty. Then Tesla India can just charge 18% GST on software sale instead of paying 60% import duty and other taxes as software doesn't have a import duty structure if sold by a India registered entity.
With respect to the product 15 mm increase in ground clearance will be required, such that the ground clearance is atleast 155-160mm. This is very critical to India spec Model 3.
The competition to SR+ will be from Mercedes C Class, BMW 3 Series and Audi A4, all of which cost around $70,000 due to road tax of around 20% vs 0% for EVs. Even basic adaptive cruise control is not part of these offerings. Hence even CBU Model3 SR+ will be attractively priced.
STAGE 2: Small Assembly plant for local assembly
As we see from Stage 1, Tesla may just sell a few thousand cars at the $65-70,000 price tag. The way to make it more affordable is by investing a small amount into an assembly plant. The duty for SKD (Semi Knocked Down) vehicles with pre-assembled battery packs, motors, motor controllers, chargers, power control units, energy monitor contractors, brake systems, electric compressors not mounted on a chassis or a body assembly is only 15% vs 60%(on SR+) for a CBU car. With that the possibilities are so much more.
This is a rough calculation. Having not reduced the total cost for the SKD kit, I have considered the assembly/other expenses to be lower. Approximate price for SR+ lowers by ~$18,500 when assembled locally. Similarly Model 3 LR will cost ~ $61000 and Performance around $72,000. Model Y LR will be ~$66,000 and performance Y around $77,000.
All these locally assembled models will make Tesla the predominant brand in the modest 50,000 cars/year India luxury model. Even at a 25% market share (which I think will be more) , that’s 12,500 cars/year or $625 Million revenue. The capex for the small assembly plant and Supercharger network will most likely cost less than $100 Million. Hence if Tesla has a good local team it seems a no brainer.
STAGE 3: Large Assembly plant for local assembly of $20,000-25,000 Tesla, Megapacks for industry & utilities and local 4680 battery plant.
This is where I see the most growth. From stage 2 Tesla can get a reasonable feel for the Indian market . Once the Tesla $20-25,000 car is introduced and can be planned for local India manufacturing and assembly, it’ll be a game changer.
Sales of some cars at these price levels (Just sticker price, not considering TCO):
1. Kia Seltos: 7,500 /Month
2. Hyundai Creta: 9500/Month
3. Toyota Innova: 5000/Month