Photo: Christie Hemm Klok

Tesla is in talks with Indian auto parts suppliers as part of its plans to enter the local market. This step may hint at the possible creation of an assembly facility for the company's cars directly in the country.

Several people familiar with the matter told the Economic Times that Tesla is looking for critical electrical, electronic and mechanical components in India. The parts list includes instrument panels, windshields, differential brakes, gears, and power seats. Tesla has reportedly already partnered with several Indian companies including Sona Comstar Ltd., Sandhar Technologies Ltd., and Bharat Forge Ltd. This hints that the manufacturer is considering setting up an assembly facility in the country.

Tesla CEO Elon Musk said in July that a car factory in India is “quite likely” if the company can first import its cars with reduced duties into the country to study demand. Although there was a rumor that the government would not take this step, it later became known that it is seeking to know the roadmap for Tesla's development in India, after which it will consider its appeal regarding the import tax. The Ministry of Heavy Industry and Finance requested details of the company's development in the country during a meeting in early August. In addition, the departments also asked Tesla for their thoughts on how the import tax on fully built cars should be weighed against those cars that come in parts and are assembled afterward in India.

Cars can be imported to India in different states: Completely Built-up Units (CBU), Completely Knocked Down (CKD), and Semi Knocked Down (SKD). What import tax will be imposed on them directly depends on this. While the real demand in the Indian market for Tesla has yet to be explored, on-site assembly of cars could be more profitable and allow the manufacturer to sell cars at cheaper prices for consumers.

Previously, Tesla cars were spotted testing in the Pune district, near the town of Chakan. The appearance of the manufacturer's cars here may hint that the site is being seen as a base for testing and eventual production. Chakan already has factories of some car manufacturers, such as Mercedes, Volkswagen, Mahindra, and Bajaj. A location here would facilitate Tesla's access to suppliers and skilled workers.

Earlier, former Trade Union Minister, Nitin Gadkari, asked Tesla to consider building its electric vehicles in India to take advantage of additional incentives. He assured that the cost of producing an electric vehicle for Tesla in India would be the cheapest in the world, even compared to China.

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