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Tata Group Companies Positioned As Key Suppliers For Tesla's India Operations
Tata AutoComp, Tata Consultancy Services, Tata Technologies, and Tata Electronics have quietly emerged as global suppliers to Tesla. This electric vehicle giant accounts for nearly half of the automotive industry's market value. These companies are preparing for a more significant role if Tesla expands its operations to India. "Tesla is, in a way, readying the supplier base in India," stated an industry insider who wished to remain anonymous.
Reports suggest that Tesla is sourcing critical components from over a dozen Indian firms. These include Samvardhana Motherson, Suprajit Engineering, Sona BLW Precision Forgings, Varroc Engineering, Bharat Forge, and Sandhar Technologies. The value of these parts is estimated between $1.7 billion and $1.9 billion for FY24 alone. Experts believe this trend has intensified in FY25, highlighting Tesla's increasing dependence on Indian suppliers.
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Indian Suppliers Gain Ground
Tesla has initiated discussions with its current suppliers to explore setting up operations closer to its manufacturing bases. This move aims to strengthen the ecosystem around its production facilities. While Tata companies will maintain their global sourcing agreements for now, Tesla's decision on local manufacturing or contract manufacturing in India will likely shape future steps.
Tesla's senior global procurement officials have reportedly met with many existing suppliers. They discussed developing and manufacturing specific parts like castings, forgings, electronics, and fabrication items. The Tata Group companies mentioned earlier have global agreements with Tesla as key partners in its evolving supply chain.
Focus on Local Manufacturing
Tesla is closely monitoring potential special concessions and duty waivers while finalising its expansion plans in India. The individual Tata Group companies were unavailable for comment on this matter. Meanwhile, Tesla has incorporated strict non-disclosure clauses into agreements with suppliers to keep sourcing countries and components confidential.
India is currently focused on development and supply for Tesla. The company is expected to source components such as wiring harnesses, electric motors, gearboxes, forged parts, castings, sheet metal, high-value electronics, suspension systems, electric powertrains, and ball and ceramic bearings from suppliers outside China and Taiwan.
Expanding Supply Chain
Tata AutoComp specialises in engineering products for EVs and serves as one of the key suppliers. Tata Technologies offers end-to-end product life cycle management services. TCS provides circuit-board technologies while Tata Electronics will supply chips once a local plant becomes operational.
Tesla may also look to locally source key vehicle control elements from Tata Electronics. These include printed circuit board assemblies used in battery management systems, motor controller units, and door controls.
Challenges in the Local Market
Tesla has been diversifying its supply chain after disruptions caused by the Covid-19 pandemic. It seeks alternatives to China for critical electronic, electrical, and mechanical components. The company has reportedly instructed suppliers for models sold outside China to start building components outside both China and Taiwan by next year.
As part of its broader strategy, Tesla is negotiating with several Indian states like Rajasthan, Gujarat, Tamil Nadu, Maharashtra, and Telangana to establish a manufacturing base in India. This would not only bolster Tesla's position but also create more opportunities for Indian suppliers.
The local EV market is experiencing significant changes despite promising plans by Tesla in India. Tata Motors has seen accelerated growth due to its first-mover advantage but may fall short of its target of 100,000 EV units due to declining sales since entering the EV segment in 2021.
This decline results from market slowdown factors like the withdrawal of government incentives and increased competition from rival EV companies offering more choices. Consequently, Tata Motors' market share in the electric passenger vehicle segment has been steadily decreasing.
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