Tata Meets Tesla: Indian business giant to make chips for Elon Musk’s EV company

With Tesla set to enter India, speculations are rife about who the EV company selects as its suppliers in the country. In the midst of all this, reports have started to surface that Elon Musk’s EV company may have struck a deal with India’s Tata Group to procure semiconductor chips for its EVs, worldwide.

According to a report by The Economic Times Tesla has reportedly entered into a strategic partnership with Tata Electronics to procure semiconductor chips for its global operations. This is a major indicator that the EV giant is seeing India playing a major role in its global operations.

The agreement was executed and signed quietly a few months ago as per ET’s report.

While neither Tesla nor Tata Electronics have officially commented on the deal’s value or specifics, industry insiders consider it a significant move.

It aligns with Tesla’s strategy of diversifying its supply chain and indicates a push towards creating a local ecosystem of suppliers, reducing dependency on any single market.

Tesla’s interest in India, the world’s fastest-growing major automotive market, is evident with Elon Musk’s reported visit to meet Prime Minister Narendra Modi, later this month. Although there has been no clear indication as to the agenda of this meeting, it would be safe to say that Musk will be a part of the team that finalises the location for Tesla’s Indian factory. During his visit, he is also expected to officially announce potential investments by Tesla in the EV manufacturing industry in India. Experts suggest that it will range from $2-3 billion.

Recent policy changes, including reduced import duties for EVs priced above $35,000, have incentivised global automakers to establish manufacturing plants in India.

While Tesla may initially focus on premium electric models for the Indian market, they have already started developing mid-range EVs, and are exploring options for the local production of entry-level EVs.

Meanwhile, Tata Electronics has been strengthening its workforce by hiring top-level expatriates to bolster its semiconductor technology, strategic planning, and design capabilities. The company has set up semiconductor manufacturing facilities in Tamil Nadu, Gujarat, and Assam, with ambitious plans for further expansion, backed by a $14 billion investment.

Tesla’s move to diversify its sourcing options beyond China for critical components aligns with its post-COVID strategy. While the company manufactures some electric components internally, it relies on global suppliers for sub-assemblies and other parts.

The partnership between Tesla and Tata Electronics not only underscores India’s growing importance in the global semiconductor supply chain but also positions Tata Electronics as a key player in India’s semiconductor manufacturing ecosystem, with a team boasting over 1,000 years of global domain experience driving the project forward.

(With inputs from agencies)