NEW DELHI
: Indian auto parts makers are emerging as preferred suppliers for Tesla Inc. as it diversifies away from China, two people familiar with the development said, with the U.S. electric car giant often willing to pay a higher price for the switch.
Tesla now sources a range of Indian-made components from small plastic parts and castings, to complex differential systems used in transmissions, and wheel hubs. Industry data sourced from Mint showed that 30 components – including Indian firms and multinationals with manufacturing operations in India – exported parts worth $135-150 million to Tesla in 2022-23.
However, additional sales from Tier-2 and tier-3 suppliers, that is, suppliers that supply parts to direct suppliers, are likely to add to this figure.
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Some of the largest are Sona Comstar, the largest Indian supplier for Tesla, as well as Graziano Trasmissioni India Pvt. Ltd (DANA Graziano, a DANA group company), Tata AutoComp Systems Ltd, CISWW Engineering India Pvt. Ltd and Bharat Forge Ltd. Mint was unable to verify details of the suppliers’ dealings with Tesla, due to their non-disclosure agreements with the US company.
In September, Commerce and Industry Minister Piyush Goyal said Tesla had sourced nearly $1 billion worth of auto parts from India in 2022, and was on track to double that this year. Goyal visited Tesla’s production facility in Fremont, California earlier this week, even as the government weighs a new national electric vehicle (EV) policy that could potentially lower import taxes on EVs if foreign automakers such as Tesla commit to investing in local manufacturing in the country . Tesla is targeting the mass-premium segment of passenger EVs in the country.
The US imposes steep tariffs on various Chinese-made goods; however, certain car parts such as electric motors are excluded from this. In any case, Tesla wants to diversify its vendor base to reduce its dependence on China to lower its supply chain amid ongoing tensions between the two.
“Tesla outsources many parts to India, including complex machine parts. India is considered a good, quality alternative to China even at a higher price. Tesla knows we can’t compete with China’s low raw material costs, and they recognize that and are willing to pay slightly higher prices,” said a Bengaluru-based forged parts manufacturer that recently started supplying to Tesla.
“Much of the increase in Tesla’s sources from India is simply volumes and production. The value of the source has also increased because of the truck (Cybertruck) that it is now focusing on. Overall, it is a move by them to buy more from countries like India , Vietnam and Mexico, especially for small undifferentiated parts, called commodity parts, where changeover time and changeover costs are not high,” a second supplier said on the condition of anonymity.
“Many small suppliers have emerged in the last two years to serve this business. Indian suppliers will have the opportunity to work with the industry leading EV manufacturer in the world if Tesla comes to India,” he added.
The Indian government is keen on global EV makers investing in the country as it wants to position the country as a global talent and manufacturing hub for green mobility solutions. Mint on 1 November reported that foreign EV manufacturers such as Tesla Inc. those looking for an Indian foothold may have relief at hand, with the government considering lower import duties for EVs up to a certain price level.
All completely built-up (CBU) vehicles priced below $40,000 now face an import tax of 70%, and a new national EV policy may cut it to 15-30% for EVs priced $25,000-35,000, Mint reported. At 15% tax, these CBUs will be at par with the import tax for CKD (completely knocked down) cars. This will also come with the caveat that they start local manufacturing in the next two to three years and a clause to withdraw the tax if they fail to do so.