Tesla has expressed interest in establishing a presence in India, including talking with local government officials about building a factory and lobbying the government to reduce tariffs for automobile imports. Now Indian auto parts manufacturers are pushing for Tesla to source at least some of its parts from businesses within India.
The Automotive Component Manufacturers Association (ACMA) says that sourcing parts from Indian businesses will benefit the country’s economy by boosting the manufacturing industry.
“We would welcome any foreign or domestic entry, capacity expansions on any vehicle segment as long as it promotes value addition and localisation, which gives the opportunity for the component sector to flourish,” said ACMA president Deepak Jain.
Critics say that India does not yet have a robust supply chain to support the manufacturing of electric vehicles and necessary components like EV batteries would have to be imported anyway. The ACMA has countered by saying that it is currently discussing the possibility of expanding India’s capacity to produce components that are most needed by EV manufacturers like Tesla. According to Jain, the major obstacle in making large investments in EV component manufacturing involves the low demand for electric vehicles in the country.
According to Tesla CEO Elon Musk, a lot of the problem with slow sales could be solved with lower tariffs. The current tariffs for electric vehicle imports could as much as double the cost of one of Tesla’s higher priced vehicles. Musk suggested lowering the tariffs to a more reasonable 40% of the vehicle’s price.
Other automakers like Hyundai and Mercedes-Benz have also thrown their support behind lowered tariffs, saying that it will give them a chance to test the market for electric vehicles before they commit to manufacturing vehicles and possibly sourcing parts from companies in India. A Mercedes-Benz spokesperson said that buyers of luxury vehicles, especially electric ones, make it easier for the technology to “trickle down” to more affordable, possibly locally manufactured vehicles if carmakers can gain confidence that there is demand for them.
Tesla may also choose to add the capability to manufacture batteries to a possible future factory in India, like it plans to do in Germany with regulatory paperwork filings indicating that it plans to add battery manufacturing capacity to Gigafactory Berlin. Its preference for “in-house” manufacturing of critical components for its electric vehicles has helped its vehicles take two of the three top slots on Cars.com’s most recent list of top “Made in America” vehicles. This preference was also highlighted at last year’s “Battery Day” event, in which Elon Musk announced a more efficient manufacturing process for batteries.
While Tesla does not yet have manufacturing capacity within India, it has expressed interest in expanding its presence in the India market. Local auto component manufacturers are simply pushing for local sourcing of components if and when it does build a factory within India. Elon Musk’s interest in India has been around for a while, as he gave Prime Minister Narendra Modi a tour of the Gigafactory in California in 2015 as part of his efforts to interest the Indian government in electric vehicles.