Tesla said to be planning India’s integration in global component supply chains

Tesla executives in May visited India and met government representatives, including officials from the office of prime minister Narendra Modi.

Tesla has committed to integrate India in its auto component supply chain, for which discussions have taken place, people aware of the matter said. “Discussions have happened on larger-scale sourcing from India for its global manufacturing units. Tesla wants to source more parts from India. There may not be an option but to increase sourcing from India as it’s a huge auto component market. Localisation requirements are also increasing,” a senior government official told Moneycontrol.

India’s auto components industry, which accounts for 2.3 percent of the country’s GDP, is set to become the third-largest globally by 2025, according to the government.

Tesla already buys about $100 million worth of steering wheel and other parts from India.

The largest electric vehicle manufacturer may look at a much larger sourcing of steering parts, cables, lightweight forged parts, and critical electronic, electrical and mechanical components for its global manufacturing units. Its supply chains are spread across the US, Europe, and Asia, including China.

Import duty standoff

The company founded by Elon Musk is likely to expand its vendor base in India for deeper integration in the auto components supply chain, the official said.

Tesla executives visited India in May and met government representatives, including officials from the office of prime minister Narendra Modi.

Tesla has emerged among the top contenders along with Mitsubishi and Ola Electric bidding for lithium in the Jammu and Kashmir region. Lithium is used in batteries for electric vehicles.

Musk halted Tesla's plans to enter the Indian market last year after a standoff with the government over import tariffs. Tesla cars priced above $40,000 attract 100 percent import duty in India, and the cheaper ones, 40 percent. Tesla has said India has one of the highest import duties in the sector globally.

India does not have a solely electric car-focussed manufacturing company and Tesla’s entry would be beneficial. India has a large customer base with a high paying capacity and will in time attract global electric car manufacturers.

However, the government is not considering any immediate import duty cut for electric vehicles.

An email to Tesla did not receive any reply till the time of publishing of the article.