India Emerges As Tesla's Go-To For Auto Components In Move Away From China

As Tesla shifts focus from China, Indian auto parts manufacturers are becoming their go-to suppliers. Understanding the situation, Tesla is even ready to shell out more bucks for this transition. This move isn’t just a business strategy; it’s a clear sign that the electric car giant is keen on diversifying its supply chain.

What Happened? According to a report by The Mint, in the fiscal year 2022-23, about 30 component manufacturers in India, which includes both homegrown firms and international companies with Indian operations, sold parts worth $135 million-$150 million to Tesla.

This list includes big players like Sona Comstar, Tata AutoComp Systems Ltd, and Bharat Forge Ltd, among others. While details of their dealings are under wraps due to confidentiality agreements, the numbers speak volumes about Tesla’s growing interest in Indian suppliers.

Commerce and Industry Minister Piyush Goyal revealed that Tesla’s auto parts procurement from India amounted to nearly $1 billion in 2022, with expectations to double this year. Goyal’s recent visit to Tesla's Fremont facility coincides with India's consideration of a new electric vehicle (EV) policy. This policy might lower import duties on EVs, provided companies like Tesla invest in local manufacturing.

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Why it matters? Tesla’s strategy isn't just about diversifying away from China. It’s also about adapting to the global economic landscape. The U.S. has hefty tariffs on numerous Chinese-made goods, although some car parts are exempt. Yet, Tesla is actively seeking to reduce its reliance on China, a move spurred by ongoing geopolitical tensions.

A Tesla supplier speaking to Mint noted that while India can’t beat China’s low raw material costs, Tesla recognizes this and is willing to pay more for quality. Another supplier pointed out the increasing volumes of Tesla's orders, especially with their focus on the Cybertruck.

India’s government is all for this change. They’re eyeing a role for the country as a global hub for green mobility solutions. A new EV policy might soon reduce import duties for foreign EV makers like Tesla, making India an even more attractive manufacturing base. This policy might cut duties for EVs priced between $25,000 and $35,000 to 15%-30%, provided these companies start local production within a few years.

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