World’s richest man Elon Musk has a gift for India

American entrepreneur Elon Musk is all set to give India a New Year gift. After hinting time and again that his California-based clean energy company Tesla will soon make a foray into the Indian market, Musk has finally spilled the beans. According to a report, bookings for the Model 3 will start from the New Year itself and the deliveries will begin by the end of the first quarter of FY22. The Model 3 is the company’s most affordable car and is expected to be launched at an estimated price of ₹55 lakh-₹60 lakh in the domestic market. The fully-electric sedan comes with a 60 kw-hour lithium-ion battery pack, and has a range of 500 km, with the ability to reach a top speed of around 209 km/hr.

Union minister Nitin Gadkari, too, on Monday, confirmed that the famed car will begin its operations with sales first and then maybe look at assembly and manufacturing based on the response to the cars.

This, of course, isn't the first time that Tesla has evinced interest in entering the Indian market. In 2016, the company had opened bookings for the Model 3 in India with $1,000 as reservation fee but didn’t follow it up with deliveries for four years. The car’s anticipation in India was made clear from the fact that some names from the corporate sector had lined up and shelled out the reservation fee. The list included the likes of Paytm founder Vijay Shekhar Sharma, Vishal Gondal of GOQii, Sujayath Ali, CEO of online fashion platform Voonik, and Tech Mahindra's chief strategy officer Jagdish Mitra, to name a few.

However, the company’s plans were stalled temporarily due to the import policies of the country and lack of charging infrastructure. “For other countries, we pay in part for the local factory by selling cars there ahead of time. Also, gives a sense of demand. Current rules in India prevent that, but recent changes in sales tax give hope for future changes,” Elon Musk had said in a tweet.

But Tesla clearly sees India as a growing market for electric mobility. The company is keen on expanding globally and already has showrooms in Australia, Canada, China, Japan, Mexico, and Europe. After China, India is the biggest Asian market the $509 billion-company is now eyeing.

India, too, is aggressive with its EV (electric vehicles) push. The government has already announced a road map to sell only EVs in the country by 2030. While the International Energy Agency calls it “ambitious” due to the lack of battery charging infrastructure, it is nonetheless a step in the right direction, experts say.

“Tesla's plan of venturing into the country would bring positive sentiment to the Indian EV industry. It will also reinforce the confidence amongst citizens towards electric mobility. They are most welcome to join the Indian EV industry, which will strengthen the Indian EV market,” Sohinder Gill, director general, Society of Manufacturers of Electric Vehicles, a registered association representing the interests of Indian manufacturers of electric vehicles, tells Fortune India.

According to an independent study by the non-profit organisation, Council on Energy, Environment and Water (CEEW), should India achieve its 2030 EV ambition and targets, it would present a market opportunity worth nearly $206 billion in the course of this decade.

The study argues that a cumulative investment of over $180 billion in vehicle production and charging infrastructure until 2030 is needed to meet India's EV ambition. “Availability and affordability of capital for OEMs, battery manufacturers, charge point operators, and end consumers would be key to determining the pace, efficiency, and cost of India's transition to electric vehicles,” says Vaibhav Pratap Singh, senior analyst, CEEW, who had contributed to the study. Singh pointed out that consistent policy support would also be critical. “The recent announcements by the government to set up EV kiosks across 69,000 petrol stations in the country and permit sales and registration of EVs without batteries can give a boost to the sector,” he adds.

The study said that India would need a network of over 2.9 million public charging points by FY30, beyond the in-home charging points. Currently, there are only about 1,800 public charging points across the country. However, CEEW was optimistic that cumulative EV sales in all vehicle segments could jump to over 100 million units by FY30. That’s almost 200 times its current market size of just half a million.

However, there is also tangible evidence to show that the EV space in India is slowly heating up. JMK Research, a boutique consultancy firm focussed on renewables, in a study using government of India's Vahan data has pointed out that the October sales of EVs had slightly dropped by 0.8% from the previous month to 10,582 units. For Jan-Oct 2020, the industry registered about 91,474 units. Moreover, in the last two years, the EV space has also seen a slew of new product launches from companies such as Tata Motors, Hyundai, Mercedes, and Morris Garages.

When it comes to the luxury segment, the industry is expecting the Jaguar Land Rover (JLR) electric I-PACE sedan in India early next year, along with the Audi e-tron (expected to be priced at ₹1.50 crore). When it comes to the SUV space, Mahindra and Mahindra is all set to roll out the first batch of its upcoming electric SUV e-KUV100 in the next three months, at a starting price of ₹8.25 lakh.

The government’s push to convert 40% of the fleets of ride-hailing companies like Uber and Ola to electric by April 2026 will also help push EV adoption in a big way. And Tesla’s entry is just the cherry on the cake. Once the Indian market has warmed up to the Model 3, the company might also look at launching its other two electric luxury models—the “Model S” sedan and the “Model X” SUV. Tesla's entry has only made the EV space more exciting.