 "Tesla already sources parts worth $1bn from India annually, Musk’s visit, EV factory to give major boost")
An increasing number of Tesla vehicles are incorporating components manufactured in India, as the country is turning out to be a favoured import destination for the Elon Musk-led company long before its decision to establish a local plant in the country.
According to data from the Bloomberg Suppliers database, at least eight Indian suppliers are presently exporting their finished components to the US EV giant. These include Samvardhana Motherson International, Suprajit Engineering, Sona BLQ Precision Forgings, Varroc Engineering, and Bosch Ltd. Additionally, Hindalco Industries, Goodluck India, and Valiant Communication are also part of Tesla’s supplier network.
More recently, Tesla entered into a strategic agreement with Tata Electronics to acquire semiconductor chips for its operations worldwide, as reported by The Economic Times. Although the deal was reportedly conducted discreetly, it signals Tesla’s interest in establishing a supply chain in India beyond local revenue generation. However, Moneycontrol could not independently verify this report.
Estimates suggest that Tesla is currently procuring auto parts worth anywhere between $1-2 billion from India.
During his visit to Tesla’s plant in Fremont, California, in September last year, Minister Piyush Goyal disclosed that while Tesla already sources a significant portion of its materials from India, it intends to nearly double its procurement of auto parts from the country to $1.9 billion in 2024.
Industry data further indicates that in the fiscal year 2022-23, 30 part makers, comprising both Indian entities and multinational corporations operating in India, exported parts to Tesla. Key suppliers include Sona Comstar, Graziano Trasmissioni India Pvt. Ltd, Tata AutoComp Systems Ltd, CISWW Engineering India Pvt. Ltd, and Bharat Forge Ltd.
Impact Shorts
More ShortsTesla sees India as a viable, high-quality alternative as it distances itself from China, even at a slightly higher cost.
The surge in Tesla’s sourcing from India is attributed to factors such as increased volumes, focused product requirements, and a broader trend of sourcing from countries like India, Vietnam, and Mexico, particularly for commodity parts
In March, the government made a significant move by reducing the import tax on certain EV models from 100 per cent to 15 per cent, provided that a manufacturer invested at least $500 million and established a local factory. This policy shift incentivised Tesla to consider locally manufacturing in India.
The recent developments have sparked a surge in some auto ancillary stocks, with gains of around 5 percent observed this week, fueled by the increasing integration of components made in India into Tesla vehicles.
Moreover, there are additional suppliers not listed in Bloomberg’s database.
SKF India, for instance, provides automotive and industrial-engineered solutions, including bearings, and has a longstanding relationship with Tesla dating back to the launch of the carmaker’s first sports car in 2008.
Another notable supplier is Sandhar Technologies, responsible for manufacturing two components for the wiper system assembly of the Tesla Model 3. Since then, Sandhar Technologies has expanded its collaboration with Tesla, producing various components either directly or through technical partnerships.
With over half of Tesla’s global production currently concentrated in China, a potential manufacturing shift to India could prompt the relocation of part of its supply chain. Reports suggest that Tesla has been in discussions with auto component suppliers such as Sandhar Technologies and Bharat Forge, both of which already serve as suppliers to the electric vehicle giant.
While discussions are underway with multiple states including Rajasthan, Gujarat, Tamil Nadu, Maharashtra, and Telangana for the establishment of Tesla’s manufacturing unit, no final decisions have been made yet.
Industry experts suggest that given Tesla’s reliance on imports and exports from the Far East and Western Europe, access to ports may significantly influence the company’s choice of location for its manufacturing facility. Maharashtra and Tamil Nadu are perceived to have a natural advantage in this regard.
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