Can China-US conflict help Tesla befriend India? Answer is 'it's complicated'3 min read . Updated: 05 Aug 2020, 10:36 AM IST
Not only does India already benefiting from US-China conflict, but India also stands to gain more if the tussle stretches further
With the US-China relationship hitting new lows every passing day, can India, the world's fifth-largest automobile market, pitch itself to be the new manufacturing hub for electric vehicle makers like Tesla? Can the fallout from the US-China relationship force the Teslas of the world to shift their plants to India if the risk of re-balancing is contemplated? Apple contract makers like Foxconn, Wistron and Pegatron are already doing it.
How China pitched itself to lure global EV makers
The Chinese government has so far invested over $60 billion as subsidies and other incentives in electric mobility space.
Tesla's Model 3s is exempted from the 10% sales tax and the Chinese regime also provides a subsidy of around $3,500 on each car. The land for Shanghai Gigafactory was taken on lease by Tesla for 50 years, and the facility was financed mostly through China's local banks.
India has set an ambitious target for EV sales penetration of 30% for private cars, 70% for commercial cars, 40% for buses, and 80% for two- and three-wheelers by 2030.
To build a narrative around the EV ecosystem, the Indian government has approved green license plates, concessional toll rates and parking concessions for electric vehicles.
Sohinder Gill of Society of Manufacturers of Electric Vehicles (SMEV) recounts the composite advantages of having a manufacturing base in China. "Manufacturing units are supported by the government in every way. You have easy rules and regulations, tax benefits, single-window clearances, subsidised back door entry, etc. People are not going to China to meet its growing demand, but as a sourcing and manufacturing hub. Whether its a car or any other product, we are far behind," Gill said.
Put your money where your mouth is
China registered 21 million passenger cars sales in 2019, and the contribution of EV vehicles to the total sales is at 4.7%. China wants to increase it to 25% by 2025.
Transport Minister Nitin Gadkari in 2017 announced that India intends to move to 100% electric cars by 2030, a statement he soon retracted. EV sales, excluding e-rickshaws, in India grew by 20% at 1.56 lakh units in 2019-20 driven by two-wheelers.
Gill suggests that the demand creation would be a step in the right direction for the Indian govt. "The treatment is demand generation, therefore diagnose why demand is not coming up. The only integrated innovative approach by industry and govt should be towards one common objective of taking the first 10 million vehicles on Indian road in the shortest period of time," says Gill who is also the Global CEO of Hero Electric Vehicles.
Is it India's cup of tea?
India has a long list of over 350,000 millionaires and the increase is destined for a million by 2027, but still, at an average, it sells not more than 40,000 luxury cars in a financial year. The Indian domestic auto demand lags way behind if compared to China. The three luxury vehicle manufacturers - Mercedes-Benz, Audi, and BMW - sold more than 1.95 million units in China in 2018.
Gill points out that the difference between Indian and Chinese dynamics - such as per capita income, per capita consumption, running capacity and buying capacity, coupled with govt's policy reluctance - as major barriers for the personal vehicle segment.
"Our strength doesn't lie in most high-end passenger vehicles otherwise we would we exporting a large number of our own cars. Our strength lies in value for money, affordable lower entry-level products, and that product that are India proud of making like two-wheelers. Bajaj auto three-wheelers, small LCV trucks, small cars that is our strength. Any country that wants these products will come to India to make these because they have a strong strong base for those," says Gill.