What Modi Government Has Told Tesla About Its Chinese Supply Chain As EV Maker Gears To Set Up Factory in India

In a bid to establish a manufacturing plant in India, Tesla has been engaging in discussions with Indian officials for several weeks.

The proposed factory aims to produce an affordable electric vehicle (EV) priced at $24,000 for both domestic sales and exports.

However, the escalating tensions between India and China have complicated Tesla's plans, as the EV giant seeks to involve Chinese suppliers in its Indian venture.

To navigate this challenge, the Indian government has advised Tesla to follow Apple's example in finding local partners to collaborate with any Chinese suppliers involved in the project.

This recommendation comes amidst concerns that granting approvals for wholly-owned Chinese companies in India might encounter difficulties, due to the intensified scrutiny of Chinese firms following a border clash between the two countries in 2020.

During meetings with Indian officials in New Delhi, Tesla executives expressed their interest in having some of their Chinese vendors establish local bases in India to strengthen the supply chain.

However, the Indian officials highlighted the complexities involved in approving wholly-owned Chinese companies in the country.

In response, they proposed that Tesla emulate Apple's approach, which involves seeking approvals for bringing Chinese suppliers to India after forming local joint-venture partnerships.

Apple's success in obtaining approvals for Chinese suppliers to set up operations in India has served as a potential model for Tesla.

India currently lacks local suppliers for crucial components like battery cells, with major domestic EV manufacturer Tata Motors also importing them from China. If Tesla were to set up a plant in India, Chinese suppliers could play a pivotal role in keeping costs down for an affordable EV.

Despite India's hesitancy to allow Chinese companies, particularly automakers, to expand within the country, they have been approving some Chinese suppliers' joint venture partnerships with Indian firms on a case-by-case basis. This approach could provide a viable solution for Tesla's aspirations of involving its Chinese vendors in its India project.

"Tesla has been demanding a separate ecosystem for their (Chinese) vendor base...those approvals can be granted on a case-to-case basis if there is an Indian partner," Reuters quoted an official as saying.

While the specifics of Tesla's discussions with potential supply chain partners have not been disclosed, the company is actively exploring options for its India factory.

Indian officials believe that a combination of local and Chinese players could be a workable solution for Tesla's ambitious plans.