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Elon Musk’s Tesla seems to be nudging closer to selling its electric vehicles (EVs) in India, unnerving its automakers. How much of a headache will Tesla be for Indian automakers? That’s the focus of our analysis this week.
Also, Indian insurers may pitch for a one-of-its-kind charge linked to New Delhi’s air pollution. And the central bank announces a mega cash infusion to ease rates. Scroll down for more on both those stories.
This week in Asia
** Trump orders use of CFIUS to restrict Chinese investments in strategic areas
** Bangladesh and Pakistan resume direct trade after more than 50 years
** Bank of Korea resumes rate cuts as economic risks grow
** OpenAI removes users in China, North Korea suspected of malicious activities
** DBS set to cut 4,000 jobs over 3 years due to AI, CEO says
Namaste India
Tesla is getting ready to hit Indian streets.
The company has selected showrooms in New Delhi and Mumbai and is stepping up hiring plans. Signs that Musk is fast-tracking plans to enter the country come shortly after his meeting with Prime Minister Narendra Modi in Washington earlier this month.
If Musk pushes ahead with his plans to enter India, automakers, who are already struggling with pockets of weak demand and intensifying competition, will have one more battle to fight – holding on to their better-off customers.
Passenger vehicle sales in India grew 4% in 2024, the slowest in four years, industry data showed. And EVs, where many automakers have focused their new launches expecting a consumer shift, have seen patchy demand because of high prices and an inadequate charging network.
Musk has long delayed plans to sell his EVs in India, partly due to the high import duties of nearly 100% that the country levies on them. While that is yet to change, India is reviewing import duties across a number of categories, under the threat of reciprocal tariffs by the United States.
Musk’s close relationship with U.S. President Donald Trump may allow him to wrangle some concessions without giving India what it really wants – for Tesla to manufacture in India. Trump has already made his dislike for that idea public, saying it would be “unfair” to the U.S. for Musk to manufacture in India to avoid paying the high levies placed on imported vehicles.
Read this BreakingViews piece by Shritama Bose to understand why Musk is not India’s ideal foreign investor.
Technology vs pricing
Tesla’s impending entry hit shares of major Indian automakers on Friday. Mahindra and Mahindra slid 6.2%, while Tata Motors and Hyundai Motor India dropped 2.5% and 3.5%, respectively.
Both Mahindra and Tata Motors have previously lobbied against a cut in import taxes on EVs.
Analysts differ on just how much of a dent Tesla can make in the incumbents’ market positions in India.
Citi believes Tesla’s technology will give it an edge.
Tesla and China’s BYD – which is also expanding its offerings in India – have access to proven technology and manufacturing processes, which will offset the advantages of the incumbents including their wide sales and service networks, said Citi in a February 21 note.
The “hegemony” that local automakers have enjoyed in combustion engine cars has led to many foreign automakers meeting with limited local success in India but that may not hold in EVs, Citi said.
CLSA, though, feels Tesla’s tech advantage will be taken away by its pricing.
With various taxes and the import levies, the cheapest Teslas, priced at $35,000 in the U.S., could be sold at around 3.5 million Indian rupees ($40,377). That is almost three times the 1.2-million-rupee average selling price of cars in India.
About two-thirds of the EVs sold are priced under 2 million rupees, according to an estimate from Macquarie Research.
“Factors such as spacious interiors, features, aesthetics, better resale value visibility and right pricing are the key drivers in car purchase decisions, regardless of the powertrain, in our view,” CLSA said in a February 21 note.
Will Tesla leave existing brands in the rear view mirror? Write to me with your views at ira.dugal@thomsonreuters.com,
Quote of the week
“We have to start thinking about pollution as a separate factor in the pricing (of insurance) in the sense that can we then start executing a particular charge for the areas which are impacted by it?”
Amitabh Jain, the operating chief of Star Health India’s No.1 standalone health insurer, is among industry executives pitching for an increase in health insurance premiums for New Delhi, which has seen toxic air year after year.
The pollution has led to more Delhi residents seeking treatment for asthma, chronic obstructive pulmonary disease (COPD) and cardiovascular conditions in 2024, higher than in any prior year, insurers are arguing.
Market matters
The Indian central bank announced a mega $10 billion forex swap as a way to infuse cash into the Indian banking system.
The swap followed large dollar sales from the central bank to protect the rupee, which in turn had withdrawn rupee liquidity from the banking system, hurting the central bank’s effort to bring down interest rates and lift growth.
The central bank had infused liquidity worth 3.6 trillion Indian rupees over the past five weeks but analysts had said more will be needed.
Short-term bond yields and the forward premium on the rupee fell in response to the RBI’s swap.
($1 = 86.6840 Indian rupees)
Reporting by Ira Dugal; Editing by Muralikumar Anantharaman
