Tata Electronics to manufacture electronics parts for India-made Teslas

The Elon Musk-led electric vehicle maker has decided to skip its international electronics manufacturing partners Foxconn and Jabil Inc. for making parts such as printed circuit board assemblies for its India-assembled cars, these people said, speaking with Mint on condition of anonymity.

Tesla’s decision to tap Tata Electronics for manufacturing critical electronics parts bolsters the Tata Group’s position in the electronics manufacturing landscape.

“Tatas have emerged as a favorable bet for Tesla because of two reasons—they are expanding aggressively in both fabrication and packaging of semi-conductor chips, and they are also in a position to pitch more aggressively for government incentives,” said one of the people cited earlier.

As for Tesla, the deal will help it achieve local value-addition in India, allowing the company to take advantage of the government policy to lower import duty for electric vehicle makers that commit to investing and manufacturing in the country. 

As per this policy, EV manufacturers have to achieve 50% domestic value-addition in five years from signing up for the government’s scheme to avail concessional duties.

Tata Electronics did not reply to queries emailed on Saturday on the development.

Tata Electronics has already begun purchasing equipment to establish a new facility. The electronics supplied by the company for Tesla will go into its battery management system, motor controller unit, door controls among other vehicle controls.

Tata Electronics is setting up India’s first chip fabrication plant in Dholera in Gujarat, which will manufacture semi-conductors for applications in the automotive, including electric vehicles, telecommunications and defence industries, among others. The fab unit is expected to come on stream in 2026.

Tesla is scouting for manufacturing sites for its new India factory, in what is playing out as a close contest between the states of Gujarat and Karnataka. Musk, Tesla’s CEO, is expected to make details of the EV maker’s investment plans official in a visit to the country and in a meeting with Prime Minister Narendra Modi later this month.

The partnership comes at a time when Tata is considering the acquisition of Pegatron’s iPhone manufacturing unit in India, which is already equipped to produce control computers for Tesla in the global markets.

Industry experts believe that Tesla’s approach to integrating Indian manufacturers into its supply chain could serve as a model for other foreign companies looking to enter the domestic market. 

By partnering with a well-established Indian firm like Tata Electronics, Tesla not only benefits from the local expertise and infrastructure but also aligns itself with governmental policies that are increasingly favouring domestic production over imports.

Tesla is known for a high degree of vertical integration, meaning it manufactures many components internally, including some printed circuit board assemblies that go into various vehicle controls. For external sourcing, Tesla works with multiple established electronics manufacturers. 

Companies like Foxconn are aggressively positioning themselves as contract manufacturers of EVs, much like they are for iPhones for Apple. Foxconn has said its long-term target is to produce 50% of the world’s EVs in a white-labelling arrangement where it will act as contract manufacturer for other brands.

In India, meanwhile, the government is expected to officially open up the window for applications to its new EV scheme in about two months.

Mint was the first to report, in July last year, that Tesla executives in their meetings with the Union ministries of heavy industries and commerce had discussed importing EVs from the company’s Berlin gigafactory for the Indian market, as opposed to Shanghai, which is its main export base.