India’s auto component makers want Tesla’s potential entry to benefit the country’s suppliers, and one way to achieve that is for the company to manufacture locally, the head of the Automotive Component Manufacturers Association (ACMA) said.
Tesla Inc (TSLA.O) Chief Executive Elon Musk said in July that the company was likely to set up a factory in India if successful with imported vehicles after it sought big cuts in import duties on electric cars.
The demand, reported by Reuters, has polarised the auto industry in the country and prompted a rare public debate among carmakers over whether easing import tax rates runs contrary to India’s push to promote domestic manufacturing.
“We will always promote localisation,” Deepak Jain, ACMA president told reporters on Tuesday, when asked about the industry body’s views on Tesla’s demand.
“We would welcome any foreign or domestic entry, capacity expansions on any vehicle segment as long as it promotes value addition and localisation, which gives the opportunity for the component sector to flourish,” he said.
Some industry executives argue that India does not have a robust supply chain or domestic production of electric vehicle (EV) components such as motors or lithium cells and would need to rely on imports, at least in the short-term.
Jain said ACMA is in talks with the government to identify which EV parts can be manufactured locally, but also warned that companies may struggle to make large investments at a time when sales have been slow for over two years.
ACMA’s comments supporting local production are similar to those made last week by companies like Tata Motors (TAMO.NS), the top-seller of electric cars in the country, and Softbank Group-backed (9984.T) Ola, which is making electric scooters in India.
Supporting import duty cuts, however, are South Korean automaker Hyundai Motor (005380.KS), which has an about 18% share of India’s car market, and German automaker Daimler’s (DAIGn.DE) Mercedes-Benz.
Santosh Iyer, vice president, sales and marketing at Mercedes in India told Reuters that luxury car customers are early adopters of new technology and once they start taking to EVs it trickles down.
“To give confidence to carmakers, if India is able to liberalise the import tax then companies like Mercedes can test the market and choose to manufacture EV models locally,” he said.