Tesla Turns to Indian Auto Parts Suppliers, Boosting Exports and Diversifying from China

17 Nov 2023 , 02:53 PM

Indian auto parts manufacturers become favored Tesla suppliers as the electric car giant diversifies away from China, often willing to pay a premium for the shift. Tesla sources various India-made components, including small plastic parts, castings, differential systems, and wheel hubs.

Industry data indicates that 30 part makers, both Indian and multinational companies with operations in India, exported parts worth $135-150 million to Tesla in 2022-23.  Major suppliers include Sona Comstar, Graziano Trasmissioni India Pvt. Ltd, Tata AutoComp Systems Ltd, CISWW Engineering India Pvt. Ltd, and Bharat Forge Ltd.

Trade Minister Piyush Goyal stated in September that Tesla sourced nearly $1 billion worth of auto parts from India in 2022, with plans to double it in 2023.

Tesla aims to reduce dependence on China and de-risk its supply chain by diversifying its vendor base. The U.S. imposes tariffs on some China-made goods, but certain auto parts, including electric motors, are exempt.

Tesla values India as a quality alternative to China, even at a slightly higher cost, leading to increased outsourcing to India. The rise in Tesla’s sourcing from India is driven by volumes, product focus, and a general move to buy more from countries like India, Vietnam, and Mexico, particularly for commodity parts.

The Indian government encourages global EV makers like Tesla to invest in the country, considering lower import duties for EVs up to a specified value under a new national EV policy. Potential relief for Tesla includes reducing import duties for EVs priced $25,000-35,000 from 70% to 15-30%, provided they begin local production in the next two to three years.

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