Tesla Motors Strengthens Supply Chain Network In India Amid Progress in China

Tesla Motors, the global electric car manufacturer based out of California, is holding discussion with half a dozen component manufacturers in India as part of their grand India entry. The move comes at a time when Tesla is progressing in setting up manufacturing plant Tesla’s Gigafactory in Shanghai.

The US automotive company stormed into international fame with its Model X and Model S. Elon Musk’s company became the talk of the town with its mass market car Model 3. The company also allowed bookings for Tesla’s Model 3 to Indian customers and sources revealed that sizable number of orders flowed from India. The company is planning to disrupt the logistic industry and as part of the strategy launched the Semi truck.

Tesla Motors Strengthens Supply Chain Network In India Amid Progress in China 1

India Push – Sourcing From Local Suppliers

According to sources privy to the development, Tesla is already sourcing products from Ludhiana-based Sandhar Technologies, Hosur-based Sundram Fasteners and one more lesser known company from India. Also, the company is going ahead with its discussion for sourcing progressing with three more companies. This will take total number of supply chain companies to over half a dozen. The company’s move comes at a time when Indian auto industry is reeling under severe volatility with dwindling monthly selling affecting the entire prospect of the auto industry.

According to an analyst, the Tesla decision to align with Indian supply ecosystem is a move in the right direction. “We have to see its from the long-term strategy of the company in India. India is really on the cusp of an electric vehicle(EV) revolution as the government came up with EV policy to make Indian roads green. But the government is facing stiff opposition from conventional automotive companies who have invested large amount of money in building the ecosystem. Even after they can’t withstand the winds of technological change sweeping in India and across the globe,” he said.

Tesla Motors Strengthens Supply Chain Network In India Amid Progress in China 2

Sundram Fasteners, part of automotive company TVS group, is supporting Tesla by joining its supply chain of engine parts, especially gear transmission and radiator caps parts. Some sources said that its bevel gears, a teeth-edged parts mounted on the shafts in a gear system and surge tank caps are sourced from Sundram Fasteners for almost over an year.

Sandhar Technologies Limited, a safety and security systems manufacturer for automotive companies, supplies parts from its Ludhiana plant to Tesla. Gurugram headquartered company has been supplying wiper and related components to the company. Sandhar Technologies manufactures wiper system for Model 3s from its Ludhiana plant and supplies through its Spanish subsidiary Sandhar Technologies Barcelona. Sources revealed that the firm’s Mexican plant is also involved in the project. The company is evolving its relationship with Sandhar to the next level for its India foray.

Tesla is very keen to grab the multi-billion dollar opportunity in building the battery ecosystem in the country. Indian Finance Ministry’s Expenditure Finance Committee recently cleared government’s plan to build large factories to make lithium-ion batteries or called as 50-gigawatt hour (GWh) factories. This will incur a total investment of about ₹50,000 crore. The partnership with Tesla is from the realisation the project requires massive capital expenditure and long term commitment.

India Launch Hurdles – Slow Govt Policy

Earlier this month, Elon Musk clarified his grievance on entering India market. He made it clear that heavy tax burden and government apathy in coming out with policy initiatives are main bottlenecks on his India dream. “I am told import duties are extremely high (up to 100%), even for electric cars. This would make our cars unaffordable. For other countries, we pay in part for the local factory by selling cars there ahead of time. Also, gives a sense of demand. Current rules in India prevent that, but recent changes in sales tax give hope for future changes. But recently Chinese authorities announced on Friday that Tesla (TSLA) has won an exemption from a 10% purchase tax, which will reduce the price that customers will have to pay for a Model 3, Model S or Model X.”

Elon musk with Modi - Prime minister of India

In the recent Budget, Finance Minister Nirmala Sitharaman has come up with new tax breaks for setting up mega-manufacturing plants for lithium-ion storage batteries, solar photovoltaic cells and solar electric charging infrastructure. The move is widely seen as a measure to reduce the price of these products in the country. The government initiative is also supported by industry organisations and research bodies organising events on EVs, batteries and other ancillary technologies along with existing Indian players and global players.

To further grow the EV industry in the country, the recently concluded Goods and Services Tax Council cut down taxes on electric vehicles and chargers from 1 August on wards. The finance minister in the budget also came up with tax rebates of up to Rs 1.5 lakh for customers on interest paid on loans to buy EVs in the country. This exemption will be benefited up to Rs 2.5 lakh over the entire loan period. In another policy initiative, the government’s Faster Adoption and Manufacturing of Hybrid and Electric Vehicles or FAME 2 scheme also announced a total outlay of ₹10,000 crore with a focus on electric vehicles for commercial vehicle fleet operation.

Niti Aayog, policy think tank of the Government of India, has come up with a proposal to push for full conversion to electric vehicles (EVs) for internal combustion engine (ICE) three-wheelers by 2023. As per the Society of Manufacturers of Electric Vehicles (SMEV) statistics 7.6 lakh EVs were sold in the country during FY 2019. The number of vehicles is meagre compared with global average sales. India sold 6.3 lakh units of three-wheelers, 1.26 lakh two-wheelers and just 3,600 electric cars. According to analyst, the slump in EV sale is primarily because of poor infrastructure in the country. “The government will have to take proactive steps to push on installing charging stations across the country. If we do it systematically in our seven metros and its satellite towns and capital cities of all states, the imitative can be a roll model for other states and cities to emulate. Here local self government should be given more freedom in inviting bids for their respective jurisdiction. Now companies such as Fortum, ABB, Delta Electronics, Ather Grid, Exicom Power Solutions and EESL are expected play lead role in building this infrastructure across the country,” said the analyst.

The Indian EV industry is also reciprocating with government initiatives. Besides supply chain companies, Indian EV origital manufacturers (OEMs) also taking leaf out of the government initiative. Indian companies like Mahindra, Tata, Ather Energy, Yulu, Revolt etc are coming up with innovative, ease and affordable electric vehicles. Along with Tesla, global auto players like Mercedes-Benz, BMW, Audi, Hyundai , Toyota and Nissan are going ahead with larger gameplan to sell their EV products in India. Hyundai, a strong player in Indian automotive industry, launched electric sports utility vehicle (SUV) Kona in India. The company has fixed an on-road price of Rs 30 lakh to lure more customers. Hyundai already received 250 bookings for the model. Audi and MG Motor India are also going ahead with its launch plan of four-wheelers e-tron and eZs respectively. Nissan is also witnessing good response for its Leaf model and mulling on its great India plan.

Tesla’s China Game Plan

Tesla's china giga factory

Tesla game plan to strengthen will further strengthen India’s EV ambition. Besides the US and other European countries, Asian giants like China, Japan and Korea are working hard on these EV technology and Tesla is main part of this journey. Even though the Indian government is not expecting a a new manufacturing plant Gigafactory , which it is setting up in Shanghai, Tesla’s supply chain collaboration with companies in India is really a move in the right direction.

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