Tesla is in talks with India to build a new factory. The company intends to create its own supply chain, including Chinese suppliers. The government wants Tesla to find local partners to run the business of Chinese enterprises in India.
India asks Tesla to emulate Apple in doing business in the country
India has a strict policy on Chinese investment. While Tesla is exploring the possibility of building a factory in the country, officials have asked the company to emulate Apple in doing business. This means the Texas manufacturer must find local firms to partner with any Chinese suppliers to supply Tesla components. This was reported by Reuters, citing three government sources with direct knowledge of the situation.
Tensions between India and China complicate Tesla’s business
Tesla has been in talks with India for weeks about setting up a factory. The company intends to produce an affordable electric vehicle there for about $25,000 for local sales and export. To do this, Tesla will need its Chinese suppliers, who produce critical components for car assembly. It is worth noting there are no battery manufacturers in India, and even local companies use components from Chinese suppliers. However, strained relations between India and China make doing business difficult. It could also complicate Tesla’s plans to bring in Chinese suppliers.
Local companies can help locate Chinese suppliers for Tesla
In meetings with officials in New Delhi, Tesla executives informed the Indian government that it would like to see some of its Chinese suppliers set up a base locally. The information was confirmed by Indian officials with direct knowledge of the negotiations.
However, the government said that issuing permits for 100% Chinese companies in India could be very difficult. After the conflict in 2020, any investment by Chinese firms requires careful scrutiny of the firms themselves, which is an embarrassment.
Indian officials have offered Tesla a workaround that Apple is already using. In recent months, the US smartphone giant has been cleared to bring Chinese suppliers to India after finding local joint venture partners for them. This means local firms can organize a joint venture with Chinese companies and supply directly to the Tesla factory.
In recent months, New Delhi has approved joint ventures of some Chinese suppliers with Indian companies on a case-by-case basis, one government source said. However, India remains hesitant to allow Chinese companies, especially automakers, to expand in the country.
One of the Indian officials said that bringing together local and Chinese players could work for Tesla.
« 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 an Indian joint venture partner, » the official said.