The entry of Elon Musk’s Tesla Inc. in India’s auto market will fuel intensity in the highly competitive space and pose a challenge for established local carmakers. This can spark a pricing war in the cost-sensitive market or nudge companies to offer additional features, according to Citi Research.

The brokerage said Indian carmakers have excelled in internal combustion engine vehicles with strong manufacturing, vendor networks, and service footprints. In EVs, foreign OEMs gain an edge through advanced technology, EV-only focus, and vertical integration (battery production). Indian OEMs’ traditional advantages may not fully translate to the EV market, it added.

Moreover, with new electric models targeting premium-end customers in relatively more urban areas, sales and service networks might not be as big a differentiator for Indian OEMs as it has been in the past with combustion engine vehicles. The increased competition could also be an overhang on valuations for passenger vehicle OEMs, Citi analysts Arvind Sharma and Jeff Chung said in a note on Wednesday.

“Tesla and BYD have access to proven technology and manufacturing processes. These could offset the advantages that Indian OEMs have, i.e. wide sales & service networks and strong supply chains,” the brokerage said.

Tesla is set to enter India in the second half of 2025 and not any time sooner. The pricier Model Y will be launched first, and not the cheaper Model 3 or the “work-in-progress”  Model 2.

Stock Picks

Citi’s top picks in the PV sector are Maruti Suzuki India Ltd., Mahindra & Mahindra Ltd. and Hyundai Motor India Ltd.

  • Hyundai Motor India: Target price – Rs 2,050

  • M&M: Target price – Rs 3,680

  • Maruti Suzuki: Target price – Rs 14,500

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