Tesla Model 3 in India: Price to Start at INR 35 Lakh Despite Lower Tariffs

Amid ongoing speculations about Tesla’s much-anticipated entry into India, a report by CLSA suggests that the company’s most affordable vehicle, the Tesla Model 3, will carry a hefty price tag ranging from INR 35 Lakh to INR 40 Lakh upon launch in the country.

The price estimation accounts for various factors, including road tax, insurance, and additional costs associated with bringing Tesla’s cheapest US model, priced at around $35,000, into the Indian market. The report indicates that the total cost of owning a Tesla Model 3 in India would sum up to approximately $45,000, equivalent to INR 35-40 Lakh.

Impact of India’s Revised EV Policy on Tesla Pricing

Lower Import Duties on EVs

The report states that Tesla’s pricing in India remains high despite the lower 15-20% import duties applicable to foreign-manufactured electric vehicles (EVs). Under the revised EV manufacturing policy, introduced by the Indian government last year:

• EVs with a CIF (Cost, Insurance, and Freight) value above $35,000 are now eligible for a reduced import duty of 15%.

• Cars above $40,000 CIF value continue to face a 110% import duty, including agriculture cess.

• Vehicles priced below $40,000 CIF incur an import duty of 60%.

Requirement for Tesla to Set Up Local Manufacturing

For Tesla to benefit from these lower import tariffs, the company must establish a local manufacturing unit in India. The policy mandates:

• A minimum investment of INR 4,150 Cr ($500 million) to set up a production unit.

• A minimum turnover of INR 2,500 Cr in the second year for companies availing incentives under this scheme.

With the government expected to officially notify the new EV policy in the coming weeks, Tesla's India strategy will be crucial in determining its pricing structure.

CLSA’s Market Analysis: Tesla’s Positioning in India

Tesla vs Domestic EV Brands

According to CLSA, Tesla’s potential pricing will not pose a major threat to established Indian automakers like Maruti Suzuki, Tata Motors, Hyundai, and Mahindra. The report states:

“We believe that if Tesla positions itself with Model 3 at an on-road price that is 20-50% higher than models like Mahindra XEV 9e, e-Creta, e-Vitara, etc., it would not significantly impact domestic EV models.”

The key factors influencing car purchases—spacious interiors, advanced features, aesthetics, resale value, and competitive pricing—are expected to play a significant role in consumer decisions, regardless of the powertrain technology used.

Tesla’s Roadmap for Competitive Pricing

To gain a significant foothold in the Indian market, Tesla must establish a local production facility to drive down costs. CLSA notes that even if Tesla launches a sub-INR 25 Lakh model, it may still struggle to disrupt India’s dominant automakers.

Moreover, producing an affordable Tesla model under $25,000 (approximately INR 20 Lakh) would likely come with “meaningful compromises in features and specifications” compared to its global counterparts.

“Setting up a local factory, enhancing localization, and benefiting from lower duties on sub-assembly and battery pack imports would help Tesla produce models priced competitively with premium offerings from domestic players,” CLSA added.

Tesla’s Plans to Expand in India

Manufacturing and Showroom Locations

In addition to pricing concerns, Tesla is aggressively exploring expansion strategies in India. Recent reports suggest that:

• Tesla is in talks with multiple states including Gujarat, Maharashtra, and Tamil Nadu to set up a manufacturing facility.

• The company has finalized locations for showrooms in Delhi and Mumbai as part of its India entry plan.

• Tesla is currently recruiting key talent to support its operations in India.

• The company may import a few thousand EVs to India in the coming months before starting local production.

These developments indicate that Tesla is serious about penetrating the Indian market, but its success will depend on how it navigates pricing challenges and localization strategies.

Conclusion: Tesla’s India Entry Faces Price and Policy Hurdles

While Tesla’s arrival in India is highly anticipated, pricing remains a key concern. Even with the revised EV import duty policy, the Model 3 is expected to be priced at INR 35-40 Lakh, making it significantly more expensive than local EV options.

To gain a competitive edge, Tesla will need to invest in local manufacturing, leverage government incentives, and possibly introduce a more affordable model tailored for the Indian market. The coming months will be crucial in determining whether Tesla can successfully establish a foothold in India’s rapidly evolving EV ecosystem.