What Could Tesla Really Bring To India?
As a car manufacturing base, a Tesla investment is not likely to be very substantial because no one really thinks of India as an export base.
On today's episode, financial journalist Govindraj Ethiraj talks to G Chokkalingam, founder of Equinomics Research, as well as Kapil Kaul, CEO and Director of airline consulting and research firm CAPA India
- <00:50> Elon Musk is great badge value but what do we really get with a Tesla in India?
- <09:06> Indian markets hit lifetime highs. What happens when you are at the peak and the view starts to get hazy! with G Chokkalingam
- <16:34> A rocking party that ended in India buying some 1,000 planes in two days has ended. What comes next? with Kapil Kaul
- <24:51> Amul girl creator Sylver DaCunha passes away
TRANSCRIPT
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
Good morning, it's Thursday, the 22nd of June and I'm Govindraj Ethiraj coming to you from Mumbai, India's financial capital!
Our top reports of the day
Elon Musk is great badge value but what do we really get with a Tesla in India?
A rocking party that ended in India buying some 1,000 planes in two days has ended. What comes next?
Indian markets hit lifetime highs. What happens when you are at the peak and the view starts to get hazy?
Amul girl creator Sylver DaCunha passes away.
Tesla, Here I GO
Sometime between May and December 1996, a little-known Korean car company called Hyundai incorporated and then began building a manufacturing plant in Irangattukottai near Chennai in Tamil Nadu.
The first model was called Santro and was showcased at the Delhi Auto Expo in 1998 and launched in September of the same year. It looked odd, to say the least with its tall boy design with a high roofline. This meant you could get in very easily and get out.
The only hitch was the design was almost bizarre. The first time I got hold of one for a test drive, people used to stop and… well laugh on the road. I am not joking.
Shah Rukh Khan was the brand ambassador and that made the proposition a little friendlier, and perhaps less laughable. At Rs 2.99 lakh and a 999 cc engine, it was soon flying off the dealerships. And ran in various versions till almost 2015 when the i20s started coming in Maruti was pretty much the only competitor then by the way.
In the United States, around the same time, Hyundai was considered a laughing stock too, though more for its poor looks and because it had a reputation of breaking down often. Stand-up comedian Jay Leno apparently once joked that you could double a Hyundai's value by filling it up with gas.
The turning point for Hyundai in America was a 10-year, 100,000-mile powertrain warranty. Several models followed, like the Sonata which you may remember from Indian roads too, and things improved.
Now, let's cut to the present, before coming up to speed on, well, electric cars.
Bank in the United States, Hyundai's Ioniq 6 has been largely a hit with critics. Gone are the days when people laughed at Hyundai. Not only have they stopped, but they also seem to rave about it them. At the New York auto show in April this year, Ioniq 6 was voted car of the year.
Asked last year about competition in the EV sector, Ford Motor Chief Executive Jim Farley said: "The ones I'm paying the most attention to are Hyundai/Kia, the Chinese and Tesla. That's my list," reported the Wall Street Journal
Hyundai and Kia are considered siblings and they got into electric in 2010 when Hyundai released the Blueon in Korea. The electric Kia Soul, went on sale in the U.S., Europe and South Korea in 2014. This was two years before General Motors released its rival Chevy Bolt. Tesla first launched in 2006 on a small scale though.
Interestingly, Kia and Hyundai are priced pretty close to the Tesla in the $40,000 + range and price even in a market like India is not a disadvantage. Features vary but a Kia EV6 goes head on with the BMW electric i4 in the Rs 65 to Rs 70 lakh range. This would have been unbelievable even a few years ago.
The WSJ describes the experience of a doctor customer from Portland Maine who owned an Audi, wanted to switch to an EV, put himself on the waiting list for several, including the Ford Mustang Mach - E and finally settled for Hyundai's Ioniq 5 because he was apparently sold on the driving dynamics.
Now, Hyundai has been in India for the longest including in electric along with Kia, Toyota and Suzuki are now joined at the hip partly at least to sell hybrids and India's largest electric car maker is now Tata Motors with a close to 80% market share. All other companies, including the likes of Volvo and the German car majors, have all launched full-bred electric versions.
So finally, before you ask me what has all this got to do with the price of onions, why indeed are we so excited about Tesla, a car I am not sure most can afford?
So let's try and break down what is on offer and what is not.
Tesla's cars will start at around Rs 70 lakh from what it appears today. If Tesla were to manufacture locally, prices would come down but it is definitely not competing in the mid-segment, battery or no battery. And thus unlikely to sell beyond a few thousand cars in a year unless some iPhone-like fever grips buyers and they would want one no matter what.
So as a car manufacturing base, a Tesla investment is not likely to be very substantial because no one really thinks of India as an export base though that is what is being discussed. For that, Tesla is already grounded in China and is scouting all over Asia, including South Korea and Indonesia, Vietnam, and Thailand are all vying for attention for EV and battery manufacture in general with billions of dollars and billions of dollars more than India already committed.
On the other hand, a Tesla gigafactory that makes batteries units, power electronics, energy storage systems, and parts is something India could see and benefit from and is aspiring for.
Tesla has five gigafactories in Nevada and New York in the United States; Shanghai, China; Berlin, Germany, and Texas, in the United States again. The term gigafactory seems to be a little broadly applied, including also the manufacture of cars in centers like Shanghai and Berlin.
So could India be the host for Tesla GigaFactory 6?
It's very possible but at this point, there are at least two more contenders going by industry chatter. One is South Korea and the second is Japan apart from India or maybe sequentially all.
This is obviously big but there are many other investments into India in the battery and automotive space also lining up and there are too many to get into. Also remember, India's one big focus on the big project side is semiconductors with at least two big projects on the anvil.
The biggest attraction to Tesla I feel is mystique, mostly that of Elon Musk. After all, people liken Marvel hero Iron Man to Musk, no one thinks of the founder or son of the founder of Hyundai in the same vein. Shaking hands or greeting Elon Musk is something that most people would want to do, even if some don't like the way he runs Twitter.
I for sure would like to interview him, maybe going back to his first principles approach to rocketry and cars, rather than Twitter.
So the larger question is can a Tesla galvanise other investments into India? At this point, that is not so clear to me.
Unlike mobile phone manufacturers, where Apple is a giant magnet in moving production around the world, including to India from China, all the major automotive companies of the world are already in India or have already been here and run away, like Ford and GM.
More importantly, they are all racing ahead in electric car manufacturing.
Even Elon Musk remarked that Hyundai was doing well in July last year when it emerged that Hyundai had captured a 9% market share in contrast to Tesla's 75% at the time.
The gigafactory as a battery maker or other power systems can be a driver of sorts, though it will require - as will many other investments - a very modern and reliable supply chain reliability which is only now coming into place. One location for the gigafactory rumored is Tumkur in Karnataka. Which generally makes sense given other infrastructure around the place.
But that is a rumour. As far as facts go, he did call himself a "fan of Mr Modi" and said that India had "more promise than any large country in the world".
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Incidentally, commercial space also came up in the meeting between Mr Modi and Musk. And that is an area, particularly reusable rockets, India can surely benefit from and look forward to learning more about and of course implementing over time.
Markets Surge To All-Time Highs
Indian stock markets closed at record highs on Wednesday thanks to sustained flows from foreign investors. The 30-share BSE benchmark Sensex hit a fresh all-time high of 63,588 before closing at 63,523, up 195 points in a rally led predominantly by banking, financial, and IT stocks. The previous high was 63,583 hit on December 1, 2022.
The broader NSE Nifty surged 40 points or 0.21% to end at 18,857, not before hitting 18,875.
The market capitalisation of BSE-listed firms hit a fresh all-time high of Rs 294.49 lakh crore in Wednesday's morning trade
The top 5 stocks that lifted the Sensex up were ITC, Tata Motors, Nestle India, Larsen and Toubro, and Ultratech Cement.
You may recall my talking about ITC a day after its results the week before last and the big bet valuation guru Aswath Damodaran had taken on this stock in a conversation with me in 2020. ITC and Tata Motors were up 33% in this period from December by the way.
At the peak, the air thins out and it can get a little lonely so to speak.
So how is it looking for the next few months? Remember, most institutional investors have been betting on strong earnings growth powering the markets for the next year or two. Does that outlook still hold or, are there some storm clouds, quite literally on the horizon?
I spoke with a market veteran of many cycles G Chokkalingam, founder of Equinomics Research, and began by asking him what he was looking at and out for.
Airlines Go On A Buying Spree
In the last two days, two airlines, Indigo, and Air India have cemented or freshly ordered close to 1,000 aircraft. Including the latest lot of 500, Indigo had a total of 1,330 Airbus A320 aircraft on order.
Other airlines are also ordering aircraft though in smaller numbers. Vistara which is effectively Air India is ordering at least 10 or more, so is Akasa and so on.
With so many aircraft lining up, where do things stand? At least looking at the next 6-7 years because who knows about life beyond that?
More specifically, where do we stand on capacity in terms of airport infrastructure, and where do we stand more importantly, on projected demand in India?
To discuss this, I spoke with Kapil Kaul, CEO of the airline consulting and research firm CAPA India. I began by asking him how he saw these big orders playing out on Indian skies as and when the aircraft begin to arrive.
Meanwhile, if you are house hunting, maybe you need to hunt faster because the market is evidently going to be buzzing this year too.
The residential real estate sector across the top six cities of India - Mumbai, Delhi NCR, Bengaluru, Pune, Kolkata, and Hyderabad - is expected to clock 8-10% sales growth this fiscal year, according to a report by rating agency CRISIL.
By the way, as we spoke in an earlier episode, housing prices across the top eight cities in India, increased 8% year on year thanks to strong housing demand supplemented by what the construction industry claims are consistent quality launches by top developers.
The highest rate increase in residential prices was in Delhi at 16% followed by Kolkata at 15% and Bangalore at 14%.
Mumbai is the one city where prices did not go up and actually went down in the last year but then rates here are an average square feet price of Rs 19,219, almost double of the next highest city in India.
And some sad news, Sylvester daCunha, best known as the creator of the iconic Amul girl mascot is no more.
The Amul girl made her debut in 1966 wearing a frock with red polka dots paired with matching ribbons and red shoes.
Legend has it Amul Butter's tagline was purely the best but DaCunha's wife Nisha added Utterly Amul and he added Butterly, to make it Utterly Butterly Amul.
Jayen Mehta, managing director of the Gujarat Cooperative Milk Marketing Federation and owner of the Amul brand put out a message expressing grief saying the Amul family joins in mourning this sad loss.
That's it from me for today, have a great day ahead, dos share this podcast if you like it with friends and family, and write in with any feedback on [email protected]
