US-based electric vehicle manufacturer Tesla has signed a strategic deal with Tata Electronics for the procurement of semiconductor chips for its global operations, according to a report by the Economic Times, citing officials close to the agreement. Details about the deal, including its value and specific terms, remain undisclosed as both companies have not commented on the agreement.
This move could be a part of Tesla's broader strategy to diversify its supply chain and establish a more significant presence in India. The report suggests Tata Electronics, which leads the Tata group's entry into semiconductor manufacturing, has increased its workforce by recruiting top-level executives. Tata Electronics has established semiconductor manufacturing facilities in Hosur, Dholera, and Assam, with plans to expand operations and has invested $14 billion in the business to date.
Visit by Elon Musk
Elon Musk is expected to visit India soon, possibly to meet with Prime Minister Narendra Modi and discuss future investments, including plans for EV manufacturing facilities in India. The billionaire is also expected to make some big announcements during his visit to India. Tesla is expected to invest $2-3 billion in setting up manufacturing operations for electric vehicles in India.
Recent changes in import duty regulations could facilitate Tesla’s initial focus on importing premium electric models while also planning local production. Recent policy changes in India now allow automakers to import EVs priced at $35,000 or higher at a reduced import duty of 15 per cent, provided they commit to investing $500 million within three years to establish manufacturing plants in the country.
Post-Covid, Tesla has been seeking to broaden its component sourcing options beyond China, focusing on critical parts such as electric motors and battery packs.