Tesla commits to establish vendor base in India, strengthening local presence

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Tesla commits to establish vendor base in India, strengthening local presence (Image: pixabay.com)
Tesla commits to establish vendor base in India, strengthening local presence (Image: pixabay.com)

Delhi : Elon Musk's Tesla has in principle accepted the Centre's proposal that it establish a vendor base in the nation in addition to constructing its electric automobiles there. However, the government has stated that the business may first focus on local auto assembly before establishing a vendor base.

Given that Tesla does not support decoupling the production and supply chains, there are signs that the establishment of the domestic vendor base won't be delayed very much. Currently, Shanghai, China, where Tesla has built up a sizable vendor base, is where more than half of its global production takes place. Additionally, a megapack battery manufacturing has just been constructed nearby.

Moving these vendors to India would be necessary if the corporation established a manufacturing facility there. The suppliers would then need to create joint ventures with Indian businesses as India prohibits 100% Chinese involvement due to border conflicts beyond 2020.

Analysts predicted that Tesla will push for a favourable deal with India because China is now courting Musk to keep its investments in the nation. Musk recently travelled to China and met with the country's senior officials. The government has requested Tesla to provide a roadmap outlining the timeline it needs to put up an indigenous supply chain. In the upcoming three to six months, the corporation is anticipated to submit the same.

The government is ready to grant import subsidies on the components needed for the supply chain until the firm establishes one here, officials told the Tesla team that visited the nation last month. A similar strategy is now in place for the phased manufacturing program's (PMP) production-linked incentive system for smartphones. Tesla will need to specify a deadline by which the tariff discounts on components provided to it would stop, officials said. "The government is willing to give time for setting up a domestic vendor base," sources added.

In accordance with the smartphone PLI programme, the government also assisted Apple. 

Both Apple and Samsung are granted duty protection under the PMP for components used in domestic phone manufacturing. However, they must find them locally and adhere to the deadlines that have been specified. Recently, a number of Apple's Chinese suppliers consented to establish joint ventures with Indian businesses for their local supply chains.  

The government may release a modified PLI scheme for electric vehicles and advance chemistry cell batteries once Tesla agrees to establish a manufacturing facility in the nation, along with a timetable for reaching indigenization levels, in order to entice new investments from businesses that did not previously participate. According to official sources, the PLI 2.0 will not be modified or released in a novel way; it will just be done to include Tesla in the scheme, as it was previously done for telecom goods and IT Hardware PLI schemes.

Currently, there is a budget of 18,100 crore for advanced chemical cell batteries and 25,938 crore for autos and auto parts. According to sources, the outlay may be raised, incentives may also be changed, and participating enterprises will have the choice to switch to the new PLI plan for the two.

Tesla is no longer lobbying for a reduction in the import tariff, which is at 100% for vehicles costing $40,000 or more, as it had previously demanded. 60% of the tax is applied to vehicles that cost less. In the past, Tesla has called for a reduction in the duty to 40%.