Table of Contents
What’s happening?
- The two big-ticket investments in India this year- Tesla and Apple -which were set to lift the country as a brand on the world map and further end dependence on China-led investments in the tech and auto sectors,
- Has somewhat been delayed owing to the pandemic and global chip shortage.
- Nonetheless, both the giants now aim to rewrite their India manufacturing story next year as Covid slows down.
- Both Elon Musk and Tim Cook had announced a big-bang entry into the country.
- Musk wanted his electric cars to run on the domestic roads (despite import duty concerns) while Cook announced to open first branded retail store (in Mumbai), along with a thrust on manufacturing more Apple products in the country.
- However, the 2nd Covid-19 wave & a severe automobile semiconductor shortage have somewhat hampered their plans for the year.
Why tesla wants to enter India?
- According to Soumen Mandal, research analyst at Counterpoint Research,
- India is believed to become one of the largest EV markets soon and Tesla is aware of this fact.
- “None of the big automakers wants to leave out the opportunity to acquire a share in the India market. Tesla is not an exception in this case.
- The cheap availability of resources and lower labour cost will allow Tesla as well as other automakers to earn a higher profit if they set up a local manufacturing or assembly plant,” Mandal told IANS.
- The government wants Tesla to either start local manufacturing or assembly plant before getting any import tax concession.
- “Hence, the desire to earn more profit as well as the wish to acquire a market share in one of the to-be largest auto markets is bringing Tesla to India,” he added.
The problem
- This microchip shortage has badly affected the automotive industry, which has increasingly become a big consumer of microchips.
- When most automakers are predicting that this chip shortage will go through 2023, Tesla CEO Elon Musk says that things will turn positive from 2022.
- The Indian passenger car market is mostly dominated by cars priced below Rs 10 lakh,
- Whereas the current Model 3 of Tesla costs (about Rs 29 lakh without import and other taxes) put the car in the premium segment, and the market share of the premium segment in the country was just 7% in 2020.
PLI scheme
- Presently, India is under the global spotlight due to the production-linked incentive (PLI) scheme.
- Under the scheme, the foreign manufacturers can acquire resources at very nominal cost only if they set up manufacturing or assembly plant, locally.
- The PLI scheme has been extra generous towards electric vehicles & its components like batteries because India is already running behind in EV adoption and wants to put a significant number of Evs by 2030.
What about apple?
- The pandemic has also forced the iPhone maker from opening its own offline store to its fans in India this year.
- It opened its own online store before the festive season last year, which has seen a tremendous success.
- “The retail store continues to be a key fulcrum for Apple’s growth in India. It will steer Apple products availability, accessibility and affordability in the country,” said Prabhu Ram, Head, Industry Intelligence Group (IIG), CyberMedia Research (CMR).
- The consumer demand for the new iPhone 13 series is robust in the country.
- The iPhone 13 series, for which pre-orders were thrown open in India last week, received a record response like last year from fans across the country.
- “However, the current supply chain dynamics is causing some constraints for Apple Watch as well as the iPhones.
- We believe that Apple is slightly better placed in augmenting its supplies over the coming quarters, and meet the strong demand.”
- Apple supplier Unimicron Technology Corp said that three of its subsidiaries in China had to stop production from midday on Sept. 26 until midnight on Sept. 30 to “comply with the local governments’ electricity limiting policy“.
- The temporary stop to production by the companies puts supply-chain continuity at risk during a peak season for electronics goods including the latest iPhones.
Q) India is an important iron and steel producing country in the world yet, it is not able to perform to our full potential, why?
- High costs and limited availability of coking coal
- Lower productivity
- Lack of resources
- Locations are not viable
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