Why Tesla wants others to make its cars in India
What's the story
US electric vehicle (EV) giant, Tesla, is said to be looking at a contract manufacturing deal in India as part of its entry strategy.
The company is in talks with a number of Indian automakers, industry insiders said to Autocar.
The talks are mainly centered around working with manufacturers who already have excess production capacity.
This comes as Tesla gears up for homologation of its Model Y and Model 3 cars in India.
Strategic partnerships
Tesla's approach and potential partners
Reportedly, Tesla has held talks with a Japanese and an Indian carmaker to use their excess production capacity.
The talks are still in the early stages and any partnership would depend on arriving at mutually beneficial commercial terms.
Tesla will initially import its cars as completely built units into India, without setting up a greenfield operation in the country in its first year of operations.
Cost-effective strategy
Decision on contract manufacturing explained
Tesla's move to explore contract manufacturing comes after mulling the option of establishing a local manufacturing plant under India's proposed electric vehicle policy.
The policy requires an investment of at least $500 million in production capacity, to be eligible for a reduced import duty of 15% on cars, capped at 8,000 units per year.
With contract manufacturing, Tesla hopes to reduce capex and speed up market entry.
Focus
Global manufacturing capacity and focus
Tesla already has a global manufacturing capacity of 2.5-3 million units across the US, Germany, and China.
With the entire world witnessing a slowdown in growth and an oversupply issue, the company isn't interested in opening another manufacturing unit for a new market.
It would rather focus on building its brand and sales infrastructure in India to reach its target consumers effectively.
Market placement
Tesla's positioning in the Indian market
In India, Tesla is likely to sit between mass-market and luxury brands. The company could source batteries from its German Gigafactory for Indian operations.
It would first launch Model 3 and Model Y cars with on-road prices probably over ₹40 lakh.
These models would focus on the premium segment of the market, filling the void between mainstream cars (up to ₹40 lakh) and luxury ones (around ₹50 lakh).