India Asks Tesla To Follow Apple’s Manufacturing Journey

Tesla's executives in India are strategising the company's entry into the country, exploring the potential for a factory that would manufacture a new electric vehicle (EV) priced around $24,000. The company has been in discussions with Indian government officials who have suggested that Tesla should follow Apple's example. The Indian government is encouraging Tesla to emulate Apple's approach in India, where it has formed partnerships with local firms and its Chinese suppliers, according to a Reuters report.

Following a meeting with Prime Minister Modi, Elon Musk, Tesla's CEO, has made a U-turn on his plans for India. This is a significant shift, given his previous insistence that the Indian government should remove duties on imported electric vehicles. However, this plan is fraught with challenges, particularly considering the strained relationship between India and China following a border skirmish in the Galwan region in June 2020.

Indian regulators have increased their scrutiny of Chinese firms. Nevertheless, Musk, aware of the geopolitical tensions between China and the US, has also changed course. Chinese suppliers, such as CATL, are crucial for Tesla's establishment in India and for keeping costs under control. It is a fact that no EV can be manufactured in India without Chinese components, a reality that even India's largest EV player, Tata Motors, has had to acknowledge.

Tesla executives, who also met with the CEO of Invest India, informed the government that they will need their Chinese suppliers in India. Government officials responded by explaining that granting approvals for wholly-owned Chinese companies in India would be challenging due to the intense scrutiny they face. This was, in fact, one of the reasons why Chinese battery supplier and EV maker BYD abandoned a $1 billion joint venture in India.

At this point, government officials suggested that Tesla would do well to follow Apple's example. The Cupertino-based company has successfully partnered its Chinese suppliers with local vendors, facilitating joint ventures. India is keen to avoid a situation where Chinese brands dominate the automotive market, as has happened in the smartphone sector with brands like Xiaomi and BBK group companies such as Oppo, Vivo, and OnePlus holding a significant market share.

Tesla is now actively seeking partners who could form joint ventures with its Chinese suppliers. "Tesla has been demanding a separate ecosystem for their (Chinese) vendor base ... those approvals can be granted on a case-by-case basis if there is an Indian joint venture partner," an official stated.

This development follows reports of Tesla leasing an office in Pune's Viman Nagar. Tesla's Indian entity, formed in 2021, has now leased an office spanning 5,850 sq ft on the first floor of the Panchshil Business Park. The lease, which begins on October 1, will last for five years with a three-year lock-in period.

Pune is an ideal location as it serves as a hub for automakers like Mercedes Benz, and many Chinese vendors have also established operations in the region.