Tesla inks semiconductor deal with Tata electronics for global operations

This agreement comes amid Elon Musk-led Tesla's eagerness to penetrate Indian market, and his scheduled visit to the country this month

Tesla has struck a strategic deal with Tata Electronics to acquire semiconductor chips for its global operations, The Economic Times reported, citing sources.

Executed discreetly a few months ago, this agreement is noteworthy as it positions Tata Electronics as a dependable supplier for prominent global clients aiming to establish a crucial segment of their semiconductor value chain in India, the report claimed.

Details regarding the value of the sourcing deal between Tesla and Tata Electronics, along with other specifics, remain undisclosed.

The US-based electric vehicle (EV) giant is eager to penetrate India, the world's fastest-growing major automotive market. Elon Musk, the driving force behind Tesla, is scheduled to visit India this month for discussions with Prime Minister Narendra Modi. During his visit, Musk is expected to unveil potential investments in India, including commitments to EV manufacturing facilities. Tesla currently holds the title of the world's most valuable automotive company.

Neither Tesla or Tata Electronics, the head of the Tata group's semiconductor manufacturing initiative, offered any comments, the ET report said. 

Recent reports have hinted at Tesla's interest in finding a local partner to establish its presence in India. Last week, reports emerged that the American EV giant is reportedly considering the possibility of a joint venture with Reliance to construct manufacturing facilities within the country.

According to reports, Tesla has earmarked $2 billion for its upcoming ventures in India and has been exploring various locations, including Gujarat and Maharashtra, as potential sites for its plant.

Last month, the Indian government approved an Electric Vehicle (EV) policy aimed at positioning the country as a global manufacturing hub for EVs. The policy mandates a minimum investment of Rs 4,150 crore with no maximum investment limit aimed at attracting investments from reputable global EV manufacturers.

In addition to the minimum investment requirement of Rs 4,150 crore ($500 million), the policy outlined a three-year timeline for establishing manufacturing facilities in India, commencing commercial production of EVs, and achieving 50 per cent domestic value addition (DVA) within five years at most.

Moreover, the policy specifies that the duty on the total number of EVs permitted for import would be capped at the investment made or Rs 6,484 crore (equivalent to incentives under the PLI scheme), whichever is lower.

Furthermore, it states that a maximum of 40,000 EVs, with an annual cap of no more than 8,000 vehicles, would be allowed if the investment amounts to $800 million or higher, with the option to carry over unused annual import limits.