Indians Demand Refunds After Tesla Model 3, Booked in April 2016 at Elon Musk’s Invitation, Fails to Arrive

Eight years after Elon Musk’s promise to bring the Tesla Model 3 to India, delays and high taxes have left many Indians turning to other EV brands. With Tesla’s plans still uncertain, early buyers are now seeking refunds for their $1,000 pre-order deposits.

In April 2016, when Elon Musk invited Indians to preorder the soon-to-be-released Tesla Model 3, Vishal Gondal was among the first to jump on board, eagerly placing a $1,000 deposit for a car that never made it to his driveway. As the founder and CEO of GOQii, a health-tech startup based in Mumbai, Gondal didn’t know when Tesla would officially launch in India or what the final price tag would be. However, as a devoted Elon Musk enthusiast, he was thrilled by the prospect of owning a Model 3 and was prepared to be patient.

Eight Years Later, A Promise Unkept…

In the eight years since Tesla’s initial commitment to bring its cars to India, other automakers have introduced their own electric vehicles. However, Tesla has yet to deliver on its promise, reportedly due to concerns that high taxes would render the cars too expensive in India, along with the challenges of establishing a factory in the country if it were to move production away from China.

After six years without a Tesla and no clear communication from the company about its plans for India, Vishal Gondal opted for an electric SUV from German automaker Audi. He eventually received his $1,000 deposit back in January 2023, thanks to a friend who connected him with a Tesla sales manager in India.

India, the world’s third-largest auto market after China and the United States, presents a unique challenge. In 2023, the average price of a car sold in India was $14,000, compared to $47,000 in the U.S. A new Tesla Model 3, priced at around $40,000 in America, is considered a luxury vehicle in India, where buyers expect top-tier after-sales service.

“Tesla may be a great tech company, but they just don’t know how to sell luxury cars,” Gondal remarked.

Options Multiply

Since then, other luxury automakers in India have also entered the electric vehicle market. Hemant Suthar, a Mumbai-based design studio director who also preordered a Tesla in 2016 and eventually got his deposit back in 2023, now believes that Tesla’s minimalist design can’t compete with the more luxurious EVs currently available on Indian roads.

In an effort to attract automakers like Tesla while protecting domestic brands such as Mahindra and Maruti Suzuki, India reduced import duties in March 2024 from 70%-100% to 15% for EVs priced under $35,000 — provided the automaker commits to building a factory in the country within three years.

Despite his initial enthusiasm, Elon Musk expressed concern in 2019 that import duties could double the price of Teslas made in India, making them “unaffordable.” Many in India anticipated Musk would announce plans for a factory there in April, but he canceled the trip at the last minute, citing “very heavy Tesla obligations.”

Tesla did not respond to an email request for comment.

Evolving EV Market

The electric vehicle (EV) landscape has transformed significantly over the past five years, and Tesla’s position has also shifted. With major factories now operational in China, Germany, and the U.S., the company faces slowing sales and diminishing novelty. Its sole new offering, the Cybertruck, has seen limited appeal outside the U.S., contributing to a decline in global sales for two consecutive quarters.

According to a U.S. Securities and Exchange Commission filing, Tesla has the capacity to produce 2.3 million cars annually. In 2023, production increased by 35% to 1.85 million vehicles. However, in the first half of 2024, Tesla sold 831,000 vehicles globally, falling short of Elon Musk’s forecast of over 1.8 million for the full year.

Tu Le, founder of the consultancy Sino Auto Insights, notes that the initial excitement around EVs is fading. “What was a huge opportunity five years ago is now almost a burden,” he said.

To maintain its leadership among global automakers, Tesla needs to introduce more affordable models for emerging markets like India, according to Tu. Even a $25,000 car struggles to compete in China due to the dominance of local EV makers like BYD, who are expanding globally with both budget and premium vehicles. This expansion is eroding Tesla’s first-mover advantage in markets such as India.

“Every market Tesla enters from now on, BYD will be watching and asking: What took you so long?” Tu added.

India’s Booming Domestic Market

India’s burgeoning auto market is primarily dominated by its largest carmaker, Maruti Suzuki, followed by South Korea’s Hyundai Motors and India’s Tata Motors. Although electric vehicle (EV) sales doubled in 2023, they still accounted for just 2% of total car sales, according to Counterpoint Research. Tata Motors led the market with over two-thirds of the share, while Mahindra & Mahindra and China’s BYD also saw increasing shares.

BYD, which began manufacturing batteries in India in 2008, was one of the top five EV brands in India in 2023, despite offering only two models: the six-seater e6 MPV and the Atto 3 SUV. In March 2024, BYD introduced the Seal in the Indian market.

Many in India remain skeptical about EVs, a relatively small and crowded market. Ishan Raghav, managing editor of the Indian car magazine autoX, believes that to attract mass-market customers with an affordable EV, Tesla would need to price its cars around $30,000. “The only way to achieve that is to build the car in India,” he said.

While India does not restrict imports of Chinese EVs, deteriorating ties between China and India following a military clash in July 2020 and domestic protectionist policies create additional challenges, Raghav noted.

Other Foreign Players Well Established

Even if Tesla were to start selling cars in India after committing to build a factory within three years, its imported vehicles would likely be priced similarly to luxury cars from established brands like Mercedes-Benz and Audi. These automakers have been in India for decades and have well-established dealership and service networks.

Tesla has traditionally sold directly to American customers, but dealerships are crucial for offering a luxury experience, according to Matthew Degen of Cox Automotive. “You visit a location, interact with people, and enjoy amenities. Tesla has showrooms, but they’re different from traditional dealerships,” he said.

Additionally, Tesla would need to develop a charging infrastructure in India, given the current limited number of EVs on the road.

In a July earnings call, Elon Musk mentioned that Tesla is increasing capacity at its factories and that an affordable model, expected to cost around $25,000 with new vehicle platforms and features, is “on track” for delivery in the first half of 2025. However, Tesla’s plans for India remain uncertain.

Rajesh Kumar Singh, head of the Indian agency for promoting industrial growth, revealed in a TV interview that the Tesla executive who had been in discussions with Indian officials was recently fired, leaving India unsure of the company’s intentions. “We really don’t know,” he said.