American automotive company Tesla can rightly be credited with having sparked an electric vehicle revolution in many parts of the world. While it was by no means the first auto manufacturer to produce consumer EVs, the company produced cars that were efficient, appealing, and, with some models, even affordable. As effective as these cars have been in leading widespread EV adoption, however, Tesla’s influence is greater in some regions than others. And though India has not been among those regions in past years, it recently became clear that the country is on the cusp of embracing Tesla in a significant way. Specifically, it has been reported that Tesla has plans to enter the market in India, with multiple senior executives at the company having spoken of plans to this effect.
As of this writing, the full extent and nature of Tesla’s expansion into the Indian market is somewhat unknown. The headline, however, is that the auto manufacturer plans to construct a factory in India. The plan is for this factory to produce “low-cost electric vehicles” that would sell to consumers at roughly $24,000 USD (just under 2m INR) –– about 25% cheaper than Tesla’s most affordable model in the United States. This plan came to light after officials from the company met with the Invest India agency to discuss plans.
While we do not yet know full details regarding the factory, every indication is that the plan is concrete. Tesla production is coming to India, and now the most interesting questions are what this means for the EV industry in the country more broadly and what it might mean for private investors monitoring the industry.
What Does This Mean for the EV Industry?
Right now, it is fair to say that the Indian EV industry is on the rise, but still relatively small for such a large country (let alone one with so many drivers!). In the first half of 2023, Tata Motors sold 34,000 electric vehicles, which according to market research represented some 72% of the Indian market. This indicates that total EV sales for the first half of the year were about 47,200, suggesting that somewhere close to 100,000 EVs will be sold in India over the course of the whole year. That is not a small number, of course, and it represents an increase over past years. Ultimately, however, it is just a fraction of the number of automobiles sold in India in any given year. Indeed, in 2022, some estimates put the total number of passenger cars sold throughout the country at approximately 4.7 million.
The introduction of Tesla to the Indian market would almost certainly accelerate EV sales in a meaningful way. While it is too early for exact projections, one need only look to the thriving EV market in the U.S. for an idea of how rapidly Teslas can sell. Even five years ago, we noted that in a single month, American consumers bought up Tesla Model 3 cars in excess of 14,000 units. That was only one kind of Tesla in one month before the company’s infrastructure in the U.S. was what it is today. It speaks to the kind of immediate impact the company may make in India. And once Tesla is more established, the sky is the limit. Last year, the company sold 354,822 vehicles in the U.S. alone.
What Does This Mean for Investors?
It will be fascinating to see how a new Tesla factory affects the Indian EV market. In addition to the broader market, however, it is also important to consider how private investors may be affected by the change.
This angle on the story would perhaps not have been particularly noteworthy just a few short years ago. Of late, though, the number of Indian citizens who are practicing personal investment to improve their financial futures has been on the rise. It is said that at the outset of this year, there were 11 crore investing accounts open throughout India, as opposed to just 8.4 in 2022.
The rise has been attributed largely to the COVID-19 pandemic, which made it harder for Indians to invest via traditional avenues like gold or real estate. It also gave them more time to research markets and more inclination to find ways of investing with smaller funds. These shifts in priorities and incentives occurred alongside the emergence of digital trading platforms that made it easier for Indians to trade stocks from home and with low initial deposits. Now, these platforms provide many around the country with simple access to busy trading markets –– and to major assets such as Tesla stock.
This does not necessarily mean that Indians who have opened investing accounts should rush to purchase Tesla shares. Every investment decision should be approached with care. That said, the emergence of a new EV titan in the country at least calls for monitoring. Notably, Tesla’s stock has risen more than 11% in 2023 so far and is up over 838% in the last five years. Exposure to the Indian market in the coming years may play a role in continued growth.
Also worth monitoring is the potential introduction of competitors in the Indian market in the coming years. Right now, in advance of Tesla’s arrival in the country, Indians who buy electric vehicles tend to stick to a handful of models: Tata’s Nexon EV and Tigor EV, the MG ZS EV, the Hyundai Kona Electric, and the BYD e6. These cars more or less define the present Indian market. Where Teslas become popular, however, competitors tend to follow. In the United States, for instance, Ford Motors has gotten deeply involved with EV manufacturing; Hyundai and Kia both have multiple popular models, and EV-specific alternatives such as Lucid and Rivian are on the rise as well.
Should any of these auto manufacturers follow Tesla and establish production and distribution in India, they, too, may represent interesting investing companies. Incidentally, Ford Motors has seen its stock rise nearly 10% over the last five years as it has begun to pivot toward EVs; Hyundai Motor Company is up over 37% in the same span, and Kia Corp has risen nearly 170%. Lucid and Rivian both have low, affordable stock but have the potential to gain value if and when they expand production.
Prospective investors should take a strategic approach and watch as the EV market unfolds in India. But at this stage, it appears likely that the market is on the cusp of significant change. Tesla’s arrival in India will push the EV industry throughout the country to evolve. This will result in more production, more variety, and more electric vehicles on the road. It may provide profitable opportunities for India’s growing population of private investors along the way.
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