Tesla has held discussions with union government officials, exploring the possibility of bringing its auto parts and electronics chain to India and of getting incentives and tax breaks in the process, said people with knowledge of the matter.
The development signals the US-headquartered electric vehicle maker’s renewed interest in India, close on the heels of Prime Minister Narendra Modi’s meeting with the company’s chief executive Elon Musk during his trip to the US last month, said the people.
They said Tesla has expressed interest in bringing its own supply chain ecosystem to India, even as the government has asked the company to evaluate the existing auto components supply chain in the country.
“We asked them about their specific needs and also urged them to consider sourcing their needs from the Indian ecosystem,” said a senior government official, who did not wish to be identified. “But these companies have a well-oiled system of their suppliers. These are initial talks so we are hopeful of making some headway.”
Meetings with industry execs
In the meetings, Tesla US and Tesla India executives also sought to know the structure of incentives the company and its partners are likely to receive to bring their manufacturing unit to India along with the supportive ecosystem, said people in the know. The executives also sought to know additional details of incentives and tax breaks that could be made available to the company, they said.
Besides holding discussions with the government, the company has also been meeting industry executives. At a Society of Indian Automobile Manufacturers (SIAM) meeting recently in the capital, Tesla said it would want to bring its own suppliers to India. The industry body batted for Indian component manufacturers and said the country has several mature and well-established auto players. However, Tesla maintained its “all in-house” stance and said it relies on a certain level of quality standards that can only be replicated with its established partners.
ET’s queries sent to Tesla and SIAM did not elicit a response till press time.
Like many other multinational companies, Tesla too could be exploring a ‘China plus one’ strategy, which includes diversifying to India, said experts.
“For Tesla to serve their longer-term growth goals, they need to serve all markets. The challenges in China have reinvigorated the interest of Tesla in solving all problems to be in the Indian market. Tesla needs India,” Craig Irwin, managing director, Roth Capital Partners, told ET.
In June, Tesla CEO Elon Musk said the company will be in India “as soon as humanly possible”. His comments followed a meeting with PM Modi, who was on a state visit to the US. The Indian government said it had invited Musk to explore investment opportunities in electric mobility and the commercial space sector. Musk, on his part, said he was “trying to figure out the right timing” to make that happen.
The dialogue was viewed as a positive and an indication that the standoff between the government and Tesla might be a thing of the past. Earlier, the union government had conclusively turned down the company’s demand for import duty cuts. The Texas-based manufacturer subsequently shelved its India debut plans in mid-2022. With the Modi-Musk meeting and the flurry of activity by the leadership in India, experts said they were hopeful of Tesla’s larger plans for India.
Irwin said Tesla is facing challenges in China because of the pressures that the company is exerting on Chinese companies like BYD. However, he warned that the biggest challenge for India will be infrastructure – not just the infrastructure for manufacturing and serving a manufacturing facility but also the infrastructure for adoption.
“Technology in India is world-class. The intellectual economy and technological footprint are there. What India doesn’t have is a critical mass serving industry. Inviting Tesla into India will rapidly build that critical mass,” said Irwin.
Tesla, which is characterised by many as a technology company rather than an automobile manufacturer, is also gauging the readiness of the electronics ecosystem infrastructure, said people aware of the matter.
“While many automakers are embracing software-defined vehicles, Tesla was born with this technology, resulting in less hardware and software complexity. This means that they will require fewer components than a typical EV in India,” said Ashwin Amberkar, automotive analyst at Canalys.
He said Tesla has a healthy mix of in-house and bought-in technologies, which it will use to its advantage when entering new markets, but it will also depend on new domestic suppliers for less complex auto parts.
“Tesla cannot manufacture a car by importing the components entirely,” said Amberkar. “They have to depend on suppliers who can supply them locally over importing all components from another country. But there are certain core technologies that Tesla brings in for which they have very well-established partners whom they will use.”
