4 March 2024

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Elon Musk's Tesla

Elon Musk’s Tesla Plans to build a Factory in India to support electric vehicles: Sources

According to sources, Elon Musk’s Tesla has met with Indian government officials to discuss the prospective installation of its auto parts and electronics chain in India, as well as to seek incentives and tax breaks.

 These discussions signal a renewed interest in India from the US-based electric vehicle maker, which comes shortly after Prime Minister Narendra Modi’s meeting with Tesla CEO Elon Musk during his recent visit to the US.

Despite the government’s request that Tesla analyse the country’s present auto component supply chain, insiders say Tesla is interested in developing its own supply chain ecosystem in India.

“We asked them about their specific needs and also urged them to consider sourcing their needs from the Indian ecosystem,” said an unidentified senior government official. “However, these companies have a well-oiled supply chain.” These are preliminary discussions, so we hope to make some progress.”

According to familiar sources, officials from both Tesla in the US and Tesla India enquired about the incentives framework for the firm and its partners in order to develop a manufacturing unit in India, as well as the necessary supportive ecosystem, during the discussions.

The executives also inquired about any incentives and tax reductions that could be granted to Tesla.

Elon Musk’s Tesla in India

According to ET, Elon Musk’s Tesla has been meeting with industry executives in addition to interacting with the government. Tesla revealed its aim to bring its own suppliers to India at a recent event organised by the Society of Indian Automobile Manufacturers (SIAM) in the capital.

While the industry association campaigned for Indian component manufacturers, citing the country’s existence of experienced and established firms, Tesla maintained its desire for an “all in-house” strategy. The corporation emphasised its reliance on a set of quality standards that can only be duplicated through existing partners.

Experts believe Tesla, like many other global corporations, is considering a ‘China plus one’ strategy that involves expanding into India.

Elon Musk's Tesla

“In order to achieve their long-term growth objectives, Tesla must serve all markets.” The difficulties in China renewed Tesla’s enthusiasm in resolving all issues in order to enter the Indian market. “Tesla needs India,” Roth Capital Partners managing director Craig Irwin told ET.

Tesla CEO Elon Musk stated the company’s desire to create a foothold in India “as soon as humanly possible” in June. This declaration was made following a meeting between Musk and Prime Minister Narendra Modi, who was in the United States on a state visit.

Musk has been invited by the government to investigate investment prospects in the electric mobility and commercial space industries. In response, Musk stated that he was determining the best time to make such a move.

The conversation was considered a hopeful sign that the standoff between the government and Tesla would be over. Previously, the union government had flatly refused the company’s request for import tariff reductions. Following that, the Texas-based firm cancelled its ambitions to launch in India in mid-2022. With the Modi-Musk meeting and the rush of activity by the Indian leadership, experts expressed optimism about Tesla’s wider intentions for India.

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Elon Musk’s Tesla China Issues 

According to Irwin, Elon Musk’s Tesla is having issues in China because of the pressures it is putting on local companies like BYD. However, he stressed that infrastructure is a fundamental difficulty in India. This comprises not only the infrastructure required for producing and supporting a manufacturing facility but also the infrastructure required for electric vehicle adoption to be widespread.

“Indian technology is world-class.” There is an intellectual economy and a technical footprint. What India lacks is a critical mass in the service industry. “Welcoming Tesla into India will help us quickly reach that critical mass,” added Irwin.

According to those familiar with the situation, Elon Musk’s Tesla, which is perceived by many as a technology business rather than an automobile manufacturer, is also assessing the readiness of the electronics ecosystem infrastructure.

“While many automakers are adopting software-defined vehicles, Tesla was built with this technology from the start, resulting in less hardware and software complexity.” This means they will require fewer components than a normal EV in India,” said Ashwin Amberkar, a Canalys automotive analyst.

Tesla, according to Elon Musk, uses a balanced combination of in-house and externally sourced technologies, which it intends to exploit when entering new markets.

However, for somewhat less sophisticated car parts, the business intends to rely on new domestic suppliers, demonstrating its willingness to engage with local manufacturers in order to develop a stable supply chain in those regions, according to ET.

“Tesla cannot manufacture a car by importing all of the components.” They must rely on local sources rather than importing all components from another country. “However, there are some core technologies that Tesla brings in for which they have very well-established partners that they will use,” Amberkar explained.