New Delhi [India], March 7 (ANI): The Indian passenger vehicle (PV) sector is unlikely to see significant disruption from fresh competition in the medium term, according to a report by Anand Rathi.

The report highlights that global players like Tesla and BYD face multiple challenges in penetrating the Indian market, while new entrants like VinFast and JSW MG have limited competitive impact.

The report cites four key reasons for restricted competition: a stringent electric vehicle (EV) policy, challenges in securing investment approvals for Chinese firms, a small EV market with just two per cent penetration, and the long product localisation cycle of two-four years for global automakers.

Tesla, a major EV player globally, lacks an affordable product lineup suitable for the Indian market. Its cheapest model, the Model 3, starts at USD 30,000 (~Rs2.5 million) in the US, while most Indian PV sales occur below the Rs2 million price point.

Other Tesla models like the Model Y, Model S, and Model X are priced even higher, making their widespread adoption in India unlikely. Moreover, Tesla has not yet launched a low-cost model to cater to emerging markets.

Competition from Chinese automakers remains minimal due to India's strict foreign direct investment (FDI) restrictions.

Companies like BYD and MG (now JSW MG) have struggled to gain a foothold. MG's market share in India remains low at just 1.5 per cent in FY25, primarily due to investment restrictions and its limited focus on EVs, which still account for a small fraction of the market.

Vietnamese automaker VinFast plans to enter India with an initial $500 million investment in a Tamil Nadu plant, targeting 50,000 units annually by late 2025.

The company is set to introduce electric SUVs VF6 and VF7 ahead of the festival season, but its global presence remains small, with financial struggles and a stock price decline of 80 per cent since its listing.

India's new EV policy permits the import of only premium vehicles priced above $35,000 (~Rs3 million) at a reduced 15 per cent duty, with a cap of 8,000 vehicles per year.

However, the Indian market for premium cars above Rs3 million is just 45,000 units annually, with Toyota dominating over 80 per cent of this segment.

Additionally, Chinese FDI in India is subject to strict approvals (PN3 clearance), allowing only limited joint ventures. This regulatory hurdle has largely kept Chinese automakers from entering India in a significant way.

The Anand Rathi report notes that the top four PV makers control over 75 per cent of the market, making it difficult for new entrants to establish a strong presence. Given these dynamics, Maruti Suzuki remains the preferred stock pick, as the company continues to dominate the Indian passenger vehicle segment. (ANI)