Friday, January 28, 2022

Emerging Auto Component Sector in India: Tesla in Talks for Collaborations

As Elon Musk-led SpaceX gears to launch its high-speed broadband internet service Starlink in India sometime in 2022, the Elon Musk-led electric vehicle maker ‘Tesla’ plans to extend partnership with Indian companies for critical electrical, electronic and mechanical components. The US electric vehicle maker company is making the move in order to enter the Indian market. The preliminary discussions are underway with tier 1 companies including Sona Comstar, Sandhar Technologies and Bharat Forge for the supply of components such as windshields, instrument panels, brakes, differential gears, power seats and brakes. Regarding the sourcing of the critical components, deliberations and talks were held between Tesla representatives in India and the Automotive Component Manufacturers Association of India (ACMA).

India is Emerging as Sourcing Hub for components

With Tesla’s talks in the pipeline to enter the Indian market, the country is emerging as a sourcing hub for components as other international purchases are already in place. The Indian supplies can benefit from the potential entry of Tesla into the Indian markets.

It is pertinent to note that Tesla Chief Executive Elon Musk stated in July that the company is likely to set up a factory in India if successful with imported vehicles. He sought big cuts in import duties on electric cars. Days after the appeal for import duty cut by the Chief, the government discussed a proposal to slash rates to as low as 40%. Various Indian companies believe that they will be benefited from sourcing opportunities.

Tesla EV has fewer moving components as compared to the other conventional engines. This indicates that the EV maker would require fewer component suppliers. Tesla has been secretive about its suppliers in the past who are given the responsibility to make some of the electric components including the electric motor, battery pack and charger while the rest of the parts and sub-assemblies are sourced from suppliers globally.

India’s auto component Industry:

According to a report released by McKinsey at the 60th ACMA convention, India’s auto component sector has the scope to expand its share in the global auto component trade by substituting imports of up to $12 billion. In order to achieve import substitution and increase local manufacturing hubs in India, the target has to be set by expanding the focus on manufacturing high-value parts such as engine components, engine electricals, gearbox parts, exhaust parts, fuel systems etc.

In addition to this, collaborations with global suppliers who are geared to relocate their manufacturing operations to India could further aid in developing and building new capabilities.

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