Tesla Inc. is increasingly relying on Indian auto parts suppliers as it reduces its dependence on China, according to industry insiders. The US electric car manufacturer has been willing to pay a premium for components sourced from India, leading to a higher price point for these suppliers.
Tesla currently procures various components from India, ranging from small plastic parts and castings to complex transmission systems and wheel hubs. Industry data indicates that around 30 component manufacturers, including Indian firms and multinational companies with manufacturing operations in India, have exported parts worth $135-150 million to Tesla in the fiscal year 2022-2023.
Leading Indian suppliers for Tesla include Sona Comstar, Graziano Trasmissioni India Pvt. Ltd, Tata AutoComp Systems Ltd, CISWW Engineering India Pvt. Ltd, and Bharat Forge Ltd. However, specific details about their business relationship with Tesla remain undisclosed due to non-disclosure agreements.
Tesla’s move towards Indian suppliers aligns with its strategy to diversify its vendor base and reduce dependence on China. The United States imposes high tariffs on Chinese imports, which compels Tesla to seek alternatives to de-risk its supply chain, particularly as tensions between the two countries persist.
Indian auto parts makers are considered a reliable and quality alternative to China, despite the higher prices associated with them. Tesla recognizes that it cannot compete with China’s low raw material costs but is willing to pay slightly more for the assurance of sourcing components from India.
As Tesla aims to target the mass-premium segment of electric vehicles in India, the company plans to increase its sourcing activities from countries like India, Vietnam, and Mexico. This shift is primarily driven by volume requirements and product expansion, including the focus on manufacturing the Cybertruck.
The Indian government is also keen to attract global EV manufacturers to invest in the country. An upcoming national electric vehicle policy may lower import duties for EVs, potentially benefiting foreign companies like Tesla. The policy aims to position India as a prominent talent and manufacturing hub for green mobility solutions.
1. How much did Tesla source from India in 2022?
Tesla sourced nearly $1 billion worth of auto parts from India in 2022.
2. Which Indian suppliers are preferred by Tesla?
Some of the preferred Indian suppliers for Tesla include Sona Comstar, Graziano Trasmissioni India Pvt. Ltd, Tata AutoComp Systems Ltd, CISWW Engineering India Pvt. Ltd, and Bharat Forge Ltd.
3. Why is Tesla diversifying its vendor base?
Tesla aims to reduce its dependence on China to de-risk its supply chain amidst ongoing tensions between the US and China. Diversifying its vendor base allows the company to explore alternative sourcing options.
4. What factors contribute to Tesla’s preference for Indian suppliers?
Tesla values the reliability and quality of Indian suppliers as an alternative to China. While India may have higher prices compared to China, Tesla is willing to pay a slightly higher price for the assurance of sourcing components from India.
5. What is the Indian government’s stance on global EV makers investing in the country?
The Indian government is actively encouraging global EV manufacturers to invest in the country and is considering measures such as lower import duties for EVs as part of its broader national EV policy.