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TATA to make chips for Elon Musk’s Tesla in India

With Tesla set to enter India, speculations are rife about who the EV company will select as its supplier in the country. Amidst all this, reports have surfaced 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 The Economic Times, Tesla has reportedly partnered strategically with Tata Electronics to procure semiconductor chips for its global operations. This indicates that the EV giant sees India as essential to its international operations.

The agreement was executed and signed quietly a few months ago, 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 primary automotive market, is evident from 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 finalizes 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 to $3 billion.

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

While Tesla may initially focus on premium electric models for the Indian market, it has already started developing mid-range EVs. It is exploring options for the local production of entry-level EVs.

Meanwhile, Tata Electronics has strengthened 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 underscores India’s growing importance in the global semiconductor supply chain and positions Tata Electronics as a key player in India’s semiconductor manufacturing ecosystem. A team boasting over 1,000 years of global domain experience drives the project forward.

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