A congested road for Tesla as ambitious rival drives into India

It appears Elon Musk's electric vehicle (EV) maker Tesla is a bit late to the India party. Tesla has recently finalised some showroom space in India and posted more than two dozen jobs, signalling it is getting closer to a launch. But a Tesla rival, small unprofitable EV maker VinFast Auto, which had briefly become the third most valuable auto manufacturer in the world in 2023 after Tesla and Toyota, leaving behind General Motors and Ford Motor, as its stock rose nearly 700% days after its listing on Nasdaq, is driving into India.

Reuters has reported that VinFast plans to open a car assembly plant in India by the end of June, its chief said on Thursday. Formed in 2017, VinFast began making EVs in 2021. It is backed by Vingroup, Vietnam's largest conglomerate. VinFast in January last year signed an agreement with Tamil Nadu to invest as much as $2 billion in the country. Work on the plant started soon after, with an initial investment of $500 million.

The loss-making startup had initially planned to focus on America for its foreign sales, but slow progress in the United States, even before growing uncertainty caused by U.S. tariffs, pushed the company to change strategy. VinFast's entry in itself may not be a significant challenge for Tesla in India, but it points at a crowding EV space which might make it hard for Tesla to cruise into the Indian market.

A crowded space for Tesla
Tesla has been mulling an India entry for the past several years. Now when it seems to be ready, it may have lost much of its sheen, novelty and competitive edge. VinFast is not the only challenge Tesla will face in India. VinFast has joined a host of local and Asian EV makers in India which have crowded the EV space.

Tesla will enter India when its local as well as global players are already establishing their play but still leave a big market open for it. Tesla’s Asian rivals such as Suzuki Motor Corp.’s India unit, MG Motors, Hyundai, BYD Co. and VinFast are pulling ahead in India’s nascent EV market as the fight intensifies for the fastest-growing major automobile market where Tesla Inc. is conspicuous by its absence.

Tesla’s reluctance to enter India — it had registered a local unit more than four years ago — has given competitors a head start in the country’s nascent but rapidly expanding EV market. If all the carmakers are going to converge in India and participate, Tesla should have “a little bit of FOMO in coming days,” Amit Bhatt, India managing director at the International Council for Clean Transportation told Bloomberg in January. With Tesla yet to firm up its India plans, the competition for market share remains chiefly among Asian players and is set to heat up as sector leader Maruti Suzuki joins the fray. Maruti Suzuki, the nation’s biggest carmaker by volume, has time and again demonstrated its ability to capture a big slice of the market even if it enters late — with its diesel offerings and compact SUVs in the past.

Tata Motors, the EV market leader, holds a market share of 38 percent, followed by JSW MG Motor India at 29 percent. Mahindra & Mahindra holds 16% market share. India’s electric car market saw an impressive jump in 2024, with sales rising by 20 percent and closing just shy of the 1 lakh-unit mark. This is a notable increase from the 82,688 electric cars sold in 2023.

A price-sensitive Indian market will see a rising competitive intensity. Last year, Mahindra & Mahindra (M&M) threw a big challenge to global EV makers like BYD and Tesla. After the company's keenly-watched launch of BE 6e and XUV 9e EVs, CEO Rajesh Jejurikar said that M&M was not afraid of any global carmaker and that it welcomes Tesla & BYD to "come and launch something like this in India, but at these prices". However, the trend of premiumisation sweeping the Indian market with a growing number of the rich who like to splurge on high-end items, Tesla will find ample space for its products.

Even though competition is rising as local as well as global players are entering the EV segment with rising preference among the buyers for EVs and expanding ecosystem and improving technology, India still offers a vast untapped market. Electric vehicles made up barely 3% of the total vehicles sold in 2024. That's quite a large space for Tesla to support its sagging performance elsewhere.

VinFast and other EV makers in India might pose the challenge Tesla is facing elsewhere. Its sales have been declining in key markets due to increased competition from rivals like BYD, as well as delays in new model updates. BYD has now overtaken Tesla to become the world’s largest EV manufacturer by both revenue and units sold. This, along with Musk’s political parlay, has impacted its market cap, which has shrunk by nearly $800 billion. ET has written that as Tesla struggles to regain momentum in its core markets, it would need more than a ripple in India to inject enthusiasm.

(With inputs from agencies)