Tesla in India: A Shockwave for the Automobile Industry?

Elon Musk's global energy initiatives, Tesla, with its cutting-edge technology, is preparing to penetrate the Indian market. Musk has long criticised India for high tariffs on EVs of around 100%. However, after years of discussions and negotiations, Tesla finally got the green light after India's recent trade deal, where India plans to lower import tariffs on electric cars. According to Reuters, an unnamed government official said, "We have protected the auto industry for far too long. We will have to open it up."

Will Tesla, the EV giant, redefine the rules for the traditional carmakers? And what impact could it send across the MSME ecosystem that supports the automobile industry? In this article, we are going to explore the latest developments and see what lies ahead for mobility in India.

What's Fueling the EV Debate

After the recent trade deal, Indian automotive industries have expressed significant concern following the government's decision to lower the tariffs on electric vehicles. Indian carmakers companies like Mahindra & Mahindra and Tata Motors have invested significantly in local EV production. These automakers also lobbied the ruling government to delay any cut in EV tariffs until 2029 and then, in the later phase, to reduce the tariffs from 100% to 30%.

An immediate reduction of tariffs on imports of automobiles and EVs would be a victory for foreign companies like Tesla, which has already finalized showroom space spanning 5,000 square feet in prime locations of New Delhi and Mumbai near the airport. 

The Society of Indian Automobile Manufacturers (SIAM) has raised concerns and has voiced apprehensions that decreasing tariffs might lead to a flood of imported vehicles eroding the market share of the Indian producers.

India’s Strategic Bet on EVs and Global Ties

The Indian electric vehicles (EVs) market is dominated by Tata Motors, which accounted for just 2.5% of the total car sales of 4.3 million in 2024. The government wants to see growth up to 30% by 2030.

The Indian government views tariff reductions as a strategic move to foster trade relations with the U.S. and to attract foreign investment into the country. Official statements highlight that reducing tariffs could encourage global manufacturers to set up plants in India, which can be a good opportunity to boost local employment and technological advancement.

Tesla vs. Homegrown Titans

Tesla is the pioneer in electric vehicles (EVs) known for its cutting-edge technology, whereas Indian Automakers have adopted technology only from a basic to moderate level. Indian electronic vehicles models like Tata Nexon EV or Mahindra XUV400 can only offer basic electric tech, whereas Tesla comes with autonomous driving (Autopilot) features, offers over-the-air software updates, integrated AI-backed UI, infotainment systems, and a self-diagnosing system.

Indian EVs might have an upper hand in catering to the mass market for their cost-efficiency (from ₹3 lakh to ₹20 lakh), durability, and serviceability. It also has traditional dealership networks and local service centers. Tesla is a premium global brand that targets upper-middle to high-income consumers. Even the most affordable Tesla model can cost over RS 30 Lakh in India. Tesla is built around a direct-to-customer sales model without a dealership.

Impacts on Traditional MSMEs

Tesla's entry to the Indian Market can disrupt traditional MSMEs that are involved in Internal Combustion Engine (ICE) vehicle manufacturing components, maintenance, and those providing repair services for fossil fuel vehicles. These traditional dependent MSMEs supply chains might experience a demand shrink. If alternative technologies like EVs gain market share, it will require different parts and manufacturing processes. Unless there is support from governmental policy or Original Equipment Manufacturers (OEMs) these MSMEs might even experience extinction. 

Here comes the government's role because it is the key to supporting the relied MSMEs in the form of subsidies, tax incentives, and by providing training programs. Financing by the government could play a vital role in helping these MSMEs adapt and remain competitive.

Conclusion

It is a complex challenge for the Indian government to balance between advancing international trade partnerships and, at the same time, safeguarding domestic industries. There is no doubt that Tesla, with its Noise-free, pollution-free, and high-performance features, is going to be a game-changer in the Indian market. But it is built for western roads– smooth highways and structured traffic. It will be interesting to see will Tesla is capable of adopting the wretched condition of Indian roads, unpredictable traffic, and narrow lanes.