A number of Tesla Inc’s component suppliers are scouting for the right location to either kickstart or expand operations in India, people aware said, even as the American car maker’s plans to manufacture in the country remain fluid.
While the centre continues to woo Tesla, state governments including Gujarat and Tamil Nadu are luring the EV maker’s suppliers, believing that “Tesla would be more likely to go where its supplier ecosystem is,” sources said.
“Three of Tesla’s suppliers were in Gujarat for site visits recently,” according to one person cited above who said, “they work on varied components and also supply to several other auto companies and are keen on Gujarat.”
Separately, two other European suppliers are eyeing plans to expand operations in Tamil Nadu.
The southern state-widely regarded as an automotive and electronics manufacturing hub-already has some of Tesla’s suppliers based there. This includes a European metal automotive component maker, which is looking to expand its existing operations, and a German manufacturer, which has a joint venture in Pune, manufacturing high performance rubber parts there. However, in Tamil Nadu, “they will work under the parent company name,” according to people cited above.
The German company is a leading supplier of anti-vibration-engineering applications for passenger cars of all classes up to commercial vehicles.
“The game play to bag Tesla will be to tap its supplier ecosystem,” sources added.
Competing States
If, Tamil Nadu is looking to leverage its robust electronics manufacturing ecosystem to lure Tesla and other EV makers, other states like Gujarat are leaving no stone unturned to court Tesla’s suppliers.
Experts are of the view that Tesla’s supply chain is highly intricate, characterised by partnerships with multiple tier I and tier II suppliers across different regions, enabling the timely delivery of high-quality products.
“For instance, Tesla has partnered with BYD and CATL in China for batteries, and with Panasonic and LG Energy in the USA for the same purpose,” said Soumen Mandal, Senior Research Analyst at Counterpoint Research.
“Similar strategic supply chain partnerships exist globally for components such as telematics, power cables, LED lights, and displays,” he added.
To be sure, these suppliers do not provide components only to Tesla, but serve a slew of other companies.
“With Tata Motors and Vinfast setting up massive plants in TN, it is likely that these suppliers will look to serve JLR and Vinfast too,” people aware of the matter said.
For its part, Tesla is known to favour a local supply system to accelerate production and save time and costs associated with transporting components.
“Since Tesla’s sales and production numbers are closely linked, any supply chain issues can have an immediate impact on sales. Therefore, if Tesla decides to start production, the supply system must be ready in advance,” said Mandal.
Geopolitical Impact
India is also gaining from a shift away from China by global manufacturers. “The reduction of US (manufacturers) dependency on China has brought India closer as a reliable partner to meet growing demands,” Ashwin Amberkar, automotive analyst at Canalys said. “If Tesla decides to enter the Indian market, it will leverage its global supply chain players co-located in India to its advantage, helping to reduce production costs, manage supply chain risks, and comply with local sourcing regulation.”
