Elon Musk’s Tesla has reportedly signed a deal with Tata Electronics to purchase semiconductor chips for the EV manufacturer’s global operations. The news comes a few days after Musk announced his plans to visit India and meet Prime Minister Narendra Modi.
Benefits Of The Deal With Tata Electronics
The deal with India’s Tata Electronics could be a part of the US automaker’s strategy to secure a diverse supply chain. Further, goodwill among the Indian companies will also help the brand conduct operations in the subcontinent.
According to an Economic Times report, Tata Electronics has hired top-level executives to manage the deal with Tesla. The company has also set up semiconductor manufacturing plants in Assam, Dholera, and Hosur to expand the number of assembly lines and ensure timely delivery.
The News Comes Ahead Of Musk’s Visit To India
As mentioned earlier, this news surfaced on the internet ahead of Musk’s visit to India, reportedly by the end of this month. Although the exact agenda of the meeting isn’t clear at the moment, Musk would likely discuss his future investments in the country, including that of Tesla’s EV manufacturing plants.
Tesla is likely to commit $3 billion (around Rs. 24,000 crore) in the near future to set up a fully functioning manufacturing plant in the country. Initially, the company plans to sell entry-level EVs, such as the Model 2, which could be priced around Rs. 25 to 30 lakh. Further, SpaceX’s Starlink could also be a point of discussion at the high-profile meeting.
China, However, Doesn’t Seem To Be Happy With Tesla’s Potential Foray In India
According to a report by The Global Times (a Chinese publication), India might not be able to invite and help Tesla set up its operations as the market is “grossly underprepared and immature.” It also goes on to say that Tesla’s investment in the country won’t be a wise decision, as the company focuses on mid and high-end EVs, and “nobody knows if it will find success in India.”
Low EV Adoption Rates
The article published in The Global Times also highlights other challenges Tesla could face in the country. Apart from the country’s low adoption rate of EVs, it highlights the absence of public charging infrastructure. To meet the production of EVs, India might have to expand its coal mines and power plants, which could eventually create a problem in meeting sustainability and environmental goals.
Limited Production Of Core Components
“One of the biggest issues is the limited domestic production of core components like lithium-ion batteries for EVs. India is starting relatively late in trying to create an indigenous EV supply chain,” adds the report. In conclusion, the report advises India to consider strengthening cooperation with neighboring countries and promoting manufacturing development with a pragmatic approach.
Nonetheless, the Indian government’s new EV policy allows Tesla to import 40,000 cars in five years at a discounted import duty (15 percent). This applies to models with a minimum cost of $35,000 (about Rs. 30 lakh). Moreover, the policy seems to benefit the US automaker, so its CEO is visiting India in the first place.
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