Arun Malhotra, auto industry expert, says “the luxury car market is 45,000 a year. So, even with the 30% penetration, it makes 12,000. To that extent, the market is very small and even if Tesla comes in – and jury’s out on that – how much will they be able to sell and will it really unshackle the industry and bring a price point to the mass market of Rs 8 to 12 lakh is a question that has to be answered.”
We are talking about this premiumisation trend really picking up in India. People are willing to spend that kind of money. Do you think that the entry of Tesla into India is really going to cement the fact that people are willing to put their money where their mouth is?
If you look at the Indian market, even today there are about 10 manufacturers which are making EVs or selling EVs in the country and seven to eight of them are in the semi-premium luxury market. To that extent, the market is still very limited in numbers. The luxury car market is 45,000 a year. So, even with the 30% penetration, it makes 12,000. To that extent, the market is very small and even if Tesla comes in – and jury’s out on that – how much will they be able to sell and will it really unshackle the industry and bring a price point to the mass market of Rs 8 to 12 lakh is a question that has to be answered.
You talked about how the EV penetration in the country still continues to be quite low. So, what is needed to propel that because the government is doing a lot already and do you expect a K-shaped growth coming in the EV transition over next two to three years?
See, EV penetration in the country is about 1.5%, but if you take the slightly upper end market, luxury market, it would be around 6% to 7%. Now, the FAME benefit which the government has is only applicable for commercial application. So, 90% of the EV sales do not come under the FAME benefit, they only get the benefit of the GST. Also, the price point is very important.
Today Tesla has a price that is close to Rs 55-60 lakh. If you follow the CKD route which will take time, it will still be Rs 40 lakh. So, they have to create a model uniquely for the Indian market and then all these challenges of distribution, customer insight, perspective come in. So, penetration is still a long haul, unlike two-wheelers where the penetration is growing, cars are still very low.
Another thing to keep in mind is that there are different technologies in the passenger vehicle industry which are coming up well, whether it is hybrid, whether it is flex-fuse, whether it is CNG unlike the two-wheeler. So, the penetrations will be a challenge in that sense.
What should the government do to invite some of the other bigger global brands in the country? Has enough been done or does a lot more needs to be done from the government’s end?
Already 10 to 12 manufacturers are selling EVs. The numbers may be small. So, the government has got this PLI scheme which could be made more efficient and the PLI scheme could be much more proactive, then you have the advanced cell chemistry scheme which helps in batteries. But for some period of time, the FAME benefit which is excluded basically for passenger vehicles, could be made valid for passenger vehicles and that would give a thrust to passenger vehicle sales. Today, it is excluded and so there is a limitation on this aspect.
