Daybreak - All set to enter India, Tesla seems to be learning a thing or two from Tata Motors

Episode Date: August 8, 2023

Known for its high-end EV models, earlier this year, Tesla went on a cost-cutting spree. Six months ago, though, the EV maker was on the verge of shutting down its office in India. But last week, the company took up a sprawling office space in Pune on a five-year-long lease. And last month, it was reported that Tesla plans to set up a factory in India with a yearly capacity of 5 lakh EV units. Now, at a time when there is a general fall in EV prices, it is admittedly chasing growth—even if it comes at the cost of profitability.In fact, the starting price range of Tesla models in India could be as low as US$24,000. It looks like the EV-making global giant is picking up cues from the reigning giant of India's passenger EV market—Tata Motors.Tune in to find out how.RecommendationWhy Tesla is surely watching Tata, BYDDaybreak is produced from the newsroom of The Ken, India's first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first studio recording, episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Six months ago, Tesla, the American carmaker, was on the verge of shutting down its office in India. But last week, the company took up a sprawling office space over 5,000 square feet in Pune on a five-year-long lease. And then, just day before yesterday, it announced its new CFO,

Webb of Taneja, a commerce graduate from Delhi University, who worked for many years at the Indian and American offices of Pricewaterhouse Coopers. Now, if you remember, when Prime Minister Modi visited the US in June this year, he'd had a meeting with Elon Musk. Ever since, the Tesla CEO has been tweeting about his India plans. He said how India has more promised than any large country. in the world and that he is a fan of Prime Minister Modi. So what changed in the last six months?

From almost closing its office in the country to now getting a new one in Pune and also a new global CFO of Indian origin, turns out quite a lot. In the first half of this year, Tesla slashed its prices down and its deliveries increased by more than 80%. Profits have gone up by 20% and the company's share prices that were on shaky grounds earlier this year have nearly doubled. And Tesla is still cutting costs internally. It has dropped hints that there may be more price cuts across its car models. So it looks like all these price cuts are finally paying off for Tesla right now.

And now it is only focused on growth, even if it comes at the cost of profitability. Just last month, some news outlets, including Times of India, reported that the plan is to set up a factory-in-law India with a yearly capacity of 5-lac EV units. And here comes to surprise. Prices could actually start from as low as 20 lakh rupees per come. But it's going to take at least a year before bookings begin. Meanwhile, Tesla is keeping a close eye on its competitors in India. Any guesses about who the top one is?

Tata Motors, of course. Welcome to Daybreak, a business podcast from the can. I'm your host, Nickda Sharma, and I Don't Chase the News Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 9th of August. Before we get into why exactly Tesla may be watching Tata closely, let us go back a couple of years when the first Tesla was spotted on the roads in India.

It was the Tesla Model 3, the world's all-time best, selling electric car, and its price point at which it was going to debut in the Indian market was obviously going to be that of a luxury car. But the year was 2021, and the sales of luxury cars in India had halved, from 40,000 units to less than 20,000. Global companies like Harley Davidson and General Motors had straightaway exited the country. The reason, a combination of political tension, slowing sales, and complicated government regulations. That was the time when Tesla came in. The EV giant had begun hiring in the country from top policy heads to rank and file staff for its experience center. It strategically hired people who were known to policy makers so that they

could negotiate multiple states for Tesla for tax breaks and manufacturing incentives. Now, the timing of Tesla's entry into India was quite interesting also for another reason. The only other Asian market that it was present in at the time was China. And there, there was a growing tension. You see, once upon a time, Tesla was a favorite of the Chinese government. But by 2021, Tesla was under the scanner there over allegations of failed breaks, software mess-ups, and most important, a growing fuel that its cars owned by Chinese government officials was sending data to the United States.

So India became a very strategically important market for Tesla. But the problem was the luxury car market here was a tough nut to crack. In the years that followed though, there's a price war that has started in the EV car space. And that's kind of led to this general fall in prices and EVV makers, are ramping up production. And all of this is something that Tesla now just has to face. Coming up next, why Tesla is looking at Tata Motors in India? Do you listen to Daybreak regularly?

If you do, then you'd remember just about two weeks ago, I'd told you about how Tata Motors is leading the Indian cab industry shift towards EVs. In fact, in our country's passenger EVE landscape, Tata Motors right now is the reigning giant. In the first half of this year, when Tesla was busy cutting costs, Tata Motors already held three-fourth of the market. And this is despite non-stop competition from Mahindra and Mahindra and other newer rivals like MG Motors India. Apart from Tesla, even BMW, the German carmaker is coming to India soon to locally manufacture

EVs. Now, like I told you, based on news reports, Tesla will sell its cars at a price point starting at 20-lack rupees. My colleague Seema, the editor and co-founder of the kin, has been tracking the EV space for a long time now. She thinks that Tesla has been studying the Indian EV market leader Tata Motors and has been taking cues from it. For example, Tata sells its top end model Nexon-EV-Max for close to 20 lakh rupees.

So if Tata Motors can sell at that price and gain acceptance in a price-sensitive market like India, then an aspirational brand like Tesla would be more than welcome, right? And Tesla has the capability to deliver on the price. An EC executive that Sima spoke to said and I'm quoting, Tesla doesn't do isolated manufacturing. It has the ecosystem, the integrated manufacturing and high automation to make cars at this price in India. End quote.

Also, Tesla must be observing the unique charging infrastructure lead that Tata Motors has over other carmakers and how effective that is. My colleague Sita from the Ken had reported in November 2021 how just four years after entering the EV charging space, Tata Power had a 50% market share in public charging and 40% in home and fleet charging. Coming up next, what is India looking like for Tesla now and what is Tesla doing to prepare? Tesla has been very consciously working towards cutting down its manufacturing cost through more automation. In April, it hired a manufacturing expert to fasten its solvent-less battery technology,

which is also known as dry battery electrode or DBE. According to the information, Musk wants to slash the cost of producing batteries by half, and this will allow Tesla to sell an EV for $25,000 or around $20,000. Indian rupees. The potential savings from DBE are the largest chunk of the cost reductions. But Tesla has been trying without success to convert to DBE for more than four years now. Meanwhile, very interestingly, Panasonic was the name that was doing the rounds for a planned gigafactory in India about four years ago. And why is it interesting? Because Panasonic makes batteries for Tesla using Tesla's proprietary technology.

Oh, and just so you know, Panasonic also supplies to Tata Motors. Now, just last month, news reports said that Panasonic has informed the Indian government of its plans to consider the country for a battery manufacturing operation. And today, as one of its leading customers, Tesla is also all set to enter India. A happy coincidence for Tesla, perhaps? Dear listeners, if you want to know more about this, I highly recommend that you read Seymour's newsletter called The Green Margins. In one of the recent editions, she had covered this in detail and also written about the Chinese car maker BYD company, Tesla's biggest competitor and also the world's largest EV maker. I'll link it to the show notes of this episode. Thank you for listening. I'll catch you on Friday with a new story.

Daybreak is produced from the newsroom of the Ken, India's first. first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.