India urges Tesla to follow Apple’s approach by collaborating with Chinese and Indian suppliers.

Tesla founder Elon Musk is exploring expansion opportunities beyond China, their largest foreign market. The company is considering building a plant in India, but the Indian government has requested that Tesla follow Apple’s example and collaborate with local firms to partner with any Chinese suppliers involved.

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The talks between Tesla and India have been ongoing for weeks, with the aim of establishing a factory to manufacture a $24,000 car for both local sales and exports. However, the strained relationship between India and China poses challenges for Tesla’s plans to involve Chinese suppliers.

The importance of Chinese suppliers arises from India’s lack of local suppliers for crucial components such as battery cells. Even India’s leading electric vehicle manufacturer, Tata Motors, relies on imports from China. In discussions with Indian officials in New Delhi, Tesla expressed its interest in having some of its Chinese vendors set up local operations to strengthen its supply chain. However, the Indian officials cautioned that granting approvals for wholly-owned Chinese companies in India could be complicated due to increased scrutiny following a border clash between India and China in 2020.

As a solution, the Indian officials suggested that Tesla adopt Apple’s approach, which involves forming joint ventures with local partners to bring Chinese suppliers to India. Apple has successfully implemented this strategy to expand its supply chain in India, with Taiwan’s Foxconn assembling iPhones locally.

While India has been cautiously approving some Chinese suppliers’ joint venture partnerships with Indian companies on a case-by-case basis, it remains hesitant about allowing Chinese automakers to expand in the country. For example, China’s BYD had to shelve a $1 billion investment plan to build electric vehicles in India after facing scrutiny from New Delhi.

Despite not specifying the Chinese vendors, a source familiar with Tesla’s discussions in India mentioned that the U.S. company is actively seeking supply chain partners for its India factory.

One Indian official expressed optimism that pairing local and Chinese players could work well for Tesla. They noted that if there’s an Indian joint venture partner involved, approvals for the Chinese vendors could be granted on a case-by-case basis.

As of now, both Tesla and the Indian government have not provided any official comments on these matters. The situation remains complex, with India balancing its desire for economic growth and technological development with the sensitivities surrounding Chinese investments and suppliers.

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