Shares of Mahindra & Mahindra (M&M) rose 0.49% to ₹2,682.35 in early trade on February 24, following a recent correction in the stock. Over the past ten days, M&M’s stock price had declined by 14%, primarily due to concerns surrounding Tesla’s potential entry into the Indian market and uncertainty over M&M’s electric vehicle (EV) order book. However, multiple brokerage reports have downplayed the impact of Tesla’s presence in India on domestic automakers like M&M, providing some relief to investors.
Leading brokerage Jefferies has reiterated its Buy rating on M&M, maintaining a target price of ₹4,075. Jefferies emphasized that Tesla’s entry is unlikely to pose a significant competitive threat to Mahindra in the near term. The brokerage pointed out that Tesla’s vehicles are priced at a premium, and the Indian government’s proposed duty cuts will only apply to a limited volume of imports, reducing the risk of Tesla undercutting existing automakers. Additionally, Jefferies noted that M&M has 30,000 pending EV orders, accounting for 30% of India’s total EV sales in CY24, which reflects strong domestic demand for the company’s electric models. It also highlighted that M&M’s valuation remains attractive at 20 times FY26 estimated price-to-earnings (PE) ratio, supported by an expected 18% compound annual growth rate (CAGR) in earnings per share (EPS) over FY25-27.
A separate report by CLSA further reassured investors by arguing that Tesla’s presence in India is more likely to drive the premiumization of the car market rather than disrupt the dominance of established players such as M&M, Tata Motors, Maruti Suzuki, and Hyundai. Tesla, which sold 1.8 million units globally in 2024, has its largest markets in China (40% of total sales) and the U.S. (35%), where battery electric vehicle (BEV) penetration is significantly higher than in India. The report pointed out that Tesla’s most affordable model in the U.S. is priced at around $35,000 (~₹29 lakh), making it significantly more expensive than most cars sold in India, where the average selling price (ASP) is ₹11.6 lakh and EV penetration is just 2.4%.
Another challenge for Tesla in India is the country’s high import duty structure. Currently, cars priced above $40,000 (₹33 lakh) attract a 110% import duty, while those below $40,000 face a 60% duty. While the Indian government has proposed a reduction in duties for automakers investing in local manufacturing, Tesla would still need to invest ₹4,100 crore ($541 million) and produce at least 8,000 units annually to qualify for the benefits. Despite Tesla’s plans to introduce a more affordable model in India, CLSA believes it will still be priced at a premium compared to domestic EVs. Even after duty reductions, Tesla’s pricing is expected to remain 20-50% higher than Indian electric models such as the MG ZS EV, Hyundai Kona, Tata Nexon EV, and Mahindra XUV.e series.
While Tesla’s entry into India has been met with high expectations, CLSA remains skeptical about its immediate impact on Indian automakers. Even if Tesla manages to launch a model in the ₹25 lakh range, it will still compete with well-established domestic brands that have built a strong presence in the EV segment. Additionally, factors such as local manufacturing efficiencies, extensive dealership networks, higher affordability, and better resale value will continue to favor Indian automakers over Tesla.
The report also provided insights into India’s BEV penetration, which currently stands at 2.4%, significantly lower than China (~30%) and the U.S. (~9.5%). Even with government incentives and improving EV infrastructure, CLSA forecasts that India’s BEV penetration will only rise to 6% by FY28 and 2.5% by FY30. Assuming Tesla captures 10-20% of India’s BEV market, its overall share in the Indian automobile sector would still be less than 2%, highlighting that its impact on the industry will be minimal in the near term.
Despite the excitement around Tesla’s entry, CLSA does not see the company posing a major competitive threat to Mahindra & Mahindra or other Indian automakers anytime soon. Tesla’s high costs due to import duties, the need for local production investment, and its premium pricing position make it unlikely to achieve significant market penetration in India in the short term. The report reaffirmed that Mahindra, Tata Motors, and Hyundai are well-positioned to maintain their dominance in the Indian EV market, offering better value, competitive pricing, and established brand trust among Indian consumers.
