Tesla Eyes Local Partner To Manufacture In India; Model 3 And Model Y homologation Initiated.

According to industry sources, Tesla, which plans to launch sales in India shortly, is in discussions with Indian automakers about the possibility of establishing a contract manufacturing agreement here. The US-based automaker has started talking to producers who aren’t working at their maximum capacity because of this. Additionally, Tesla has started the Model Y and Model 3 homologation process in India.

According to people with knowledge of the situation, Tesla has contacted two automakers—one from Japan and one from India—to inquire about the feasibility of using their excess capacity. The negotiations are still in their early phases, and both sides must agree on advantageous business conditions before a formal deal can be reached.

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In the meanwhile, Tesla will import its first models as fully assembled units to begin sales in India; it does not intend to establish a greenfield facility here in the first year. It would be the first time a US automaker has attempted to get into a contract manufacturing agreement with an Indian automaker, if the Elon Musk-led company is successful.

After considering the alternative of establishing a local manufacturing facility in accordance with the government’s proposed EV policy, the company chose to investigate contract manufacturing. However, in order to obtain a reduced 15 percent import charge on automobiles, with a ceiling of 8,000 units annually, this strategy necessitates a minimum expenditure of $500 million (Rs 4,150 crore) in capacity.

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Contract manufacturing would result in a faster time to market and lower capital cost. The corporation does not want to create a second manufacturing front to serve an emerging market in the midst of declining growth and a major capacity surplus globally. In the US, Germany, and China, Tesla has an installed manufacturing capacity of 2.5–3.0 million vehicles.

Another factor that might have affected the decision to initially forego local manufacturing was geopolitical circumstances. According to industry experts, Musk’s decision to establish a factory in India is illogical given the impending reduction in duty. Rather, Tesla will probably concentrate on sales infrastructure and brand development to make sure it effectively reaches its target audience.