In the early 1980s, at the height of the Licence Raj and the shortage economy in India, Bajaj announced a new two-wheeler, the Bajaj M50, a 50cc moped which, the advertisements claimed, was far superior to any other vehicle in the category (I think only the Luna was available at that time). Bajaj invited pre-bookings at Rs 500 (the M50 cost about Rs 6,000, if memory serves me right). The demand was so great that the application forms were in short supply at Bajaj dealers and at participating banks, and soon, the forms were only available by paying an illegal premium.
Last week, electric car manufacturer Tesla invited pre-bookings for their new model. This is what happened. “Model 3 orders at 180,000 in 24 hours. Selling price w avg option mix prob $42k, so ~$7.5B in a day. Future of electric cars looking bright!” Tesla CEO Elon Musk tweeted. (Update: Musk tweetedon Saturday night, India time, that the bookings have gone up to 253,000).
To understand that figure correctly, convert $7.5 billion into Indian rupees. Here you go: Rs 50,000 crore (approximately). Rs 50,000 crore of sales in 24 hours. Each booking is supported by an advance payment of $1,000, so the sales are real.
A few hours after Musk made the bookings announcement, this is what he tweeted. “Definitely going to need to rethink production planning…”
What could this rethink entail? If Tesla is to honour commitments of deliveries by 2018, the company is probably looking at more production facilities. And that means more jobs for people. Thanks to the firm bookings and the down payments, Tesla will have the financial clout to raise whatever funds are required to be invested in increasing production capacity.
Which brings me to Make in India. It is only manufacturing that can both create jobs and raise the required funds, not the services sector. It is well-nigh impossible for the services sector to have an order-book as firm as the Tesla one (or as firm as the Bajaj one many decades ago), so growth and consequent job creation in services is more of an uphill climb.
Remember the Freedom 251 scam from Ringing Bells? Over 30,000 gullible consumers paid for the mythical phone in advance and the first ads attracted 7 crore registrations.
The Tesla example is a real case of manufacturing disruption and innovation, the Freedom 251 case was a con. But both illustrate the ease of raising money without the inherent headaches of an IPO or approaching banks.
In a way, it’s crowdfunding of an idea that consumers believe in.
Mahindra Reva will be watching the Tesla updates closely, for two reasons. First, Tesla has already heightened the interest in the electric car category, which was just a niche in the car category. The Tesla S is already outselling all other luxury cars in the US, so it is no longer a niche player and now, the Tesla 3 makes the car truly mainstream. In India, the price tag forces Tesla to appeal to a miniscule market, but it will end up creating a demand for the electric car among all consumer segments. The second headline is the now proven propensity of the consumer to commit to a purchase by a booking payment.
Tesla has boosted the awareness of the electric car in India, and the Mahindra Reva e2o can suddenly find itself in pole position in a difficult Indian market. Priced at Rs 5,00,000, it can even begin to imagine dominating the entry level market, a prize that every manufacturer wants.
Tesla has made the headlines, even in India, and has created a demand for the electric car. Mahindra Reva, happily, will make the car in India, and the bucks.
The writer is Editor, Storyboard
