Tesla partners with Tata Electronics for chips supply: report

American EV giant Tesla has entered into a pact with Tata Electronics to procure semiconductor chips for its global operations, The Economic Times reported. 

Quoting officials close to the development, the newspaper reported that the agreement to supply chips was executed secretly a few months ago.

This pact highlights how Tata Electronics is positioning itself as a reliable supplier of chips to top global clients like Tesla.

Neither Tata nor Tesla have disclosed the details of the chips sourcing deal.

This comes as Tesla chief Elon Musk is set to visit India amid plans to set up an EV manufacturing plant. Musk disclosed last week that he will soon meet Prime Minister Narendra Modi in India.

He is likely to announce potential investments in India during this meeting.

Musk had earlier complained about how the high import duty on EV cars stopped him from entering the Indian market. Last month, New Delhi announced a significant policy change, allowing foreign car makers to import EVs priced at $35,000 or higher at a reduced import duty of 15%, provided the automakers commit to investing $500 million to set up a manufacturing facility for EVs in India and commence production of EVs within three years.

With this policy in sight, Tesla is likely to start exporting its high-end premium variants to India and is expected to set up entry-level car manufacturing facilities in the country.

Tesla’s deal with Tata further increases the Musk-led company’s association with India. 

Tesla is the largest electrical vehicle company in the world in terms of market value.

Tata Electronics increased its workforce and recruited the top 50-60 expatriate officials recently. The company envisages building a semiconductor fab, ATMP, and intends to produce telecom and other chip technology. The company has invested $14 billion to set up two chip manufacturing units one in Hosur in Tamil Nadu and one in Dholera (Gujarat).

Top officials who are privy to the details of this deal told ET that the company has put together a team of more than 1000 officials with domain expertise to drive this project.

According to India Electronics and Semiconductor Association (IESA), India’s electronics market is expected to reach $300 billion by 2026-2026, and the local semiconductor market will be $100 billion by 2030.

IESA president Ashok Chandak told ET that Tesla’s decision to enter into a pact with Tata Electronics shows how Tesla wishes to go beyond China for its supply of electronics chips.

Post-pandemic, the EV giant is adding more sourcing partners’ options for its critical electronics and mechanical parts requirement. Tesla also creates parts like electric motors, battery packs, and chargers, relying on other global partners for sub-assemblies and the rest.