A Secret Handshake Between Tata Group And Tesla? Has Tesla’s Global Slowdown Put India In The Spotlight?
As Tesla’s existing markets cool off, the EV giant is now turning its attention to India after a decade of stalled attempts. As it faces mounting challenges in China and declining demand in the U.S. and Europe, India is emerging as a crucial market for Tesla’s future expansion.
A second showroom in Delhi is also in the pipeline. Additionally, the company is hiring for nearly two dozen roles in India across customer support, sales operations, and product development. This comes as a relief for many Indians who, until last year, were chasing Tesla for refunds on unfulfilled pre-bookings dating back to 2016. Now, they may finally see Tesla’s EVs hit Indian roads.
Tata Group’s Quiet but Growing Role in Tesla’s Supply Chain
Meanwhile, in what can be called a significant development, under the vast umbrella of Tata Group, companies such as Tata AutoComp, Tata Consultancy Services (TCS), Tata Technologies, and Tata Electronics have quietly become global suppliers to Tesla.
The EV pioneer, which alone accounts for nearly half of the market value of the global automotive industry, has been strengthening its sourcing network, and the Tata Group is positioning itself for a bigger role if Tesla expands its footprint in India.
Tesla has reportedly engaged in discussions with these Tata subsidiaries about the development and manufacture of critical components, including castings, forgings, electronics, and fabrication items. As per market talk, senior global procurement officials from Tesla have already met with many of the existing suppliers, signaling a deeper engagement.
The Tata Group companies are believed to have global agreements with Tesla, playing a crucial role in the nearly $2-billion worth of Indian supplies to the U.S. carmaker in FY24. Furthermore, Tesla has begun exploring opportunities with its current suppliers to establish operations closer to its manufacturing bases, thereby strengthening its supply ecosystem.
While the Tata Group’s sourcing pacts remain global for now, Tesla’s decision to either set up a manufacturing facility in India or pursue contract manufacturing for the local market could significantly influence the next phase of this collaboration.
Tesla’s India Strategy
As Tesla fine-tunes its India expansion roadmap, the company is closely monitoring potential incentives such as special concessions and duty waivers. Although individual Tata Group companies have remained tight-lipped on the matter, Tesla has incorporated strict non-disclosure agreements with suppliers to maintain secrecy regarding sourcing details and component origins.
The EV giant is expected to source key components, including wiring harnesses, electric motors, gearboxes, forged parts, castings, sheet metal, high-value electronics, suspension systems, electric powertrains, and ball and ceramic bearings, from suppliers outside China and Taiwan.
Among the Tata Group companies, Tata AutoComp, specializing in engineering products for EVs, has emerged as a key supplier. Tata Technologies provides end-to-end product lifecycle management, while TCS contributes circuit board technologies.
Once a semiconductor plant becomes operational in India, either Tesla-owned or operated by a third party for the EV maker, Tata Electronics is expected to supply chips, further deepening the Tata-Tesla partnership.
Tesla may also seek to locally source key vehicle control elements from Tata Electronics, such as printed circuit board assemblies, that will go into Tesla’s battery management systems, motor controller units, and door controls.
A Bigger Base
Reports indicate that Tesla is now sourcing critical components from more than a dozen Indian companies, including Samvardhana Motherson, Suprajit Engineering, Sona BLW Precision Forgings, Varroc Engineering, Bharat Forge, and Sandhar Technologies.
This shift toward India is substantial, with the value of these parts reportedly reaching between $1.7 and $1.9 billion in FY24 itself. Experts suggest that this trend has only intensified in FY25, reflecting Tesla’s growing reliance on Indian suppliers.
After the disruptions caused by the COVID-19 pandemic, Tesla has been diversifying its supply chain, seeking alternatives to China for critical electronic, electrical, and mechanical components. Tesla, known to maintain strict confidentiality regarding its supplier relationships, manufactures some of its core electric components in-house, such as electric motors, battery packs, and chargers. However, it relies on a network of global suppliers for subassemblies and other parts.
As part of its broader strategy, the company is in talks with several Indian states, including Rajasthan, Gujarat, Tamil Nadu, Maharashtra, and Telangana, to establish a manufacturing base in India, sources said. This would not only strengthen Tesla’s position in the country but also create more opportunities for Indian suppliers.
Challenges in the Indian EV Market
While Tesla’s India plans seem promising, the local EV market is also undergoing significant shifts. Tata Motors, the top EV seller in India, has seen accelerated growth over the past few years, largely due to its first-mover advantage. Yet, despite its initial success, Tata Motors may fall short of its target of 100,000 EV units, with sales declining for the first time since the company entered the EV segment in 2021.
This slump is given to the market slowdown, the withdrawal of government incentives, and increased competition. And while Tata Motors’ market share in the electric passenger vehicle segment has been steadily decreasing – this decline also reflects the growing competition from rival EV companies that are offering an expanding range of choices.
Tesla Looking to India Amid Global Slowdown?
In February, Tesla’s sales plummeted across major markets, including the U.S., Australia, China, and several European countries. The drop was particularly steep in Germany, where sales collapsed by 76%, and in Italy, which saw a 55% decline. Increased competition, coupled with Elon Musk’s alignment with the U.S. government and far-right leaders in Europe, has contributed to Tesla’s struggles, wiping out $800 billion from its market capitalization.
As the world’s third-largest auto market, India has set an ambitious target of 30% EV adoption by 2030. The transition to electric vehicles is accelerating, but Tesla will face stiff competition from well-established local manufacturers, pricing constraints, and infrastructure limitations.
Tesla’s Market Challenge in India
India’s electric vehicle market is growing rapidly, with EV car sales rising by 20% year-over-year in 2024; however, the sector remains small, as EVs accounted for just 2.5% of the 4.3 million cars sold last year. The Indian EV market, currently valued at $54.41 billion, is projected to reach $111 billion by 2029.
Domestic giant Tata Motors dominates the space, holding a 60% share of India’s electric car market.
India’s Geopolitical Tensions with China Could Give Tesla an Edge
Unlike other Asian markets where Chinese EVs are making big inroads, Tesla has a unique advantage in India. “There’s a clear white space for Tesla here because Chinese automakers aren’t able to invest in India due to government policies,” said Puneet Gupta, head of India and Southeast Asia at S&P Global Mobility. In fact, India rejected Chinese auto giant BYD’s $1 billion proposal to build an electric car and battery factory in 2023.
Musk’s ties with U.S. President Donald Trump could also play in Tesla’s favor, according to economist Biswajit Dhar.
India has already adjusted policies to make Tesla’s entry smoother. The country previously imposed a 110% import duty on all cars, but it recently slashed that to 15% for high-end EVs priced above $35,000, provided manufacturers commit to investing at least $500 million and setting up local production within three years.
Interestingly, Trump has voiced concerns about Tesla setting up shop in India, calling it “unfair” to the U.S. He has also pushed for India to drop its car import tariffs to zero, even threatening reciprocal action if they remain in place. In response, the Modi government appears to be making special accommodations for Tesla. “This is part of a broader strategy. India will do whatever it takes to keep both the U.S. administration and Elon Musk happy,” Dhar noted.
Meanwhile, Musk’s satellite internet company, Starlink, just announced its long-awaited India entry through partnerships with telecom giants Airtel and Jio. At the same time, Trump, who once dismissed EVs, has done a complete 180, showcasing a Tesla purchase at the White House and even declaring any attack on a Tesla dealership as “domestic terrorism.”
Musk’s increasingly political profile is having direct consequences for his businesses. However, with Tesla facing a slowdown in major markets, India could be a crucial lifeline. “Tesla needs markets like India,” Gupta said, adding that there’s no better time for the company to enter than “when Trump is at the center of global politics.”
The Last Bit
Tesla’s recent moves indicate a strategic shift towards India as a key production and supply hub. However, whether Tesla will commit to full-fledged manufacturing in India or rely on contract manufacturing remains to be seen. Still, the growing involvement of the Tata Group in Tesla’s global supply chain suggests that a deeper collaboration is on the horizon.
For India, Tesla’s potential entry could be a game-changer, bringing in much-needed foreign investment, job creation, and a boost to the country’s EV ecosystem. If the government rolls out attractive incentives, Tesla’s presence in India could become more than just a market expansion, it could mark the beginning of India’s rise as a major global EV manufacturing hub.
