‘Follow Apple’s Model’: GoI tells Tesla to take cue from iPhone maker for Indian factory

Tesla, the renowned American electric car manufacturer, is exploring the possibility of constructing a factory in India for the production and sale of affordable electric vehicles (EVs), and is therefore looking for ways to establish a robust supply chain in India.

However, this endeavor is encountering obstacles due to India’s strained relations with China. Tesla heavily relies on Chinese suppliers, especially for vital components like battery cells, which play a critical role in maintaining low costs for manufacturing affordable EVs. As a result the Indian Government has asked them to take a cue from Apple’s China Plus One Policy, and source from other countries, possibly even locally.

Tesla makes a case for its Chinese suppliers
As per a Reuters report, Tesla has been engaging in discussions with the Indian government, expressing its interest in having some of its Chinese suppliers establish local operations to strengthen its supply chain in India. Nevertheless, Indian officials are proceeding cautiously in granting approvals to Chinese companies due to the tense India-China relationship following a border clash in 2020.

In response to Tesla’s request, Indian officials have proposed a solution inspired by Apple’s recent approach in India. Apple has successfully brought Chinese suppliers into the Indian market by collaborating with local Indian companies in joint ventures, providing a way for Chinese firms to operate in India while addressing the government’s concerns.

India cautious of China and Chinese businesses
India has been selectively approving joint ventures between Chinese suppliers and Indian companies on a case-by-case basis. Tesla may adopt a similar approach, pairing local Indian players with Chinese vendors for its India factory. However, the Indian government has yet to issue a final response to Tesla’s proposal.

It’s important to highlight that India exercises caution in permitting Chinese companies, particularly automakers, to expand within its borders.

For instance, another Chinese automaker, BYD, had to abandon its investment plan for building EVs in India after facing scrutiny from the Indian government. Nonetheless, there is no official policy imposing a blanket ban on Chinese brands setting up factories or outlets in India.

Tesla’s Indian ambitions
Reportedly, Tesla is planning to launch a brand-new car specifically tailored to the Indian market. This model will be the most affordable option in Tesla’s lineup, with an expected price tag of less than Rs 20 lakh.

The company is also contemplating exporting this car to other markets. However, specific details about the car and Tesla’s interactions with the Indian government are scarce. Earlier this year, Elon Musk described India as an “interesting” option for Tesla and even had a meeting with Prime Minister Modi during his visit to the United States.