Key Points
- Tesla has been in talks with India for weeks about setting up a factory.
- The factory would potentially build a $24,000 car for local sales and exports.
- Tesla has been demanding a separate ecosystem for its Chinese vendor base.
- India has suggested that Tesla emulate Apple and find local partners for its Chinese suppliers.
- New Delhi has been approving some Chinese suppliers’ JV partnerships with Indian companies on a case-to-case basis.
- India remains hesitant about allowing Chinese companies, especially automakers, to expand in the country.
Details
Tesla is in talks with the Indian government about building a manufacturing plant in India to produce a $24,000 car for local sales and exports. However, the use of Chinese vendors for supplying components to the Indian factory has become a point of concern due to strained India-China relations.
Tesla executives have expressed their interest in having some of their Chinese vendors set up operations locally in India to support their supply chain. However, the Indian government has raised concerns about granting approvals for wholly-owned Chinese companies in the country, given the intense scrutiny of Chinese firms since a border clash between the two countries in 2020.
Potential Solution
To find a potential solution, Indian officials have suggested Tesla emulate the approach taken by Apple. In recent months, Apple has been able to obtain approvals to bring Chinese suppliers to India by partnering with local joint-venture companies. This approach allows Apple to have a fast-growing supply chain in India, with Taiwan’s Foxconn assembling its iPhones there.
Similarly, Indian officials believe Tesla could form joint ventures with local Indian companies to facilitate the entry of its Chinese vendors into the country. This arrangement would likely receive approvals on a case-to-case basis.
Cautious India
India is cautious about allowing Chinese companies, particularly automakers, to expand their operations within the country. Last month, China’s BYD had to shelve a $1 billion investment plan to build electric vehicles in India after facing scrutiny from the Indian government.
As of now, the discussions between Tesla and the Indian government are ongoing, and specific details about the vendors and potential joint venture partners have not been disclosed. Tesla, the Indian government spokesperson, and the trade ministry have not provided any official comments on the matter yet.
Conclusion
Tesla is in talks with India to build a new plant, but the company’s plans may be complicated by India’s hesitation to approve wholly-owned Chinese companies in the country. Tesla could find a workaround by emulating Apple and finding local partners for its Chinese suppliers. However, it remains to be seen whether Tesla will be able to find a solution that satisfies both the Indian government and its own requirements.
