India rooting for supplier diversity and nearshoring strategies as global brands shift focus

With global brands grabbing India-bound opportunities for manufacturing and supply chain activities, the country has been making headlines for quite some time now. Lately, Apple’s manufacturing partner Foxconn has stirred up quite some action as it looks to set up a base for an increasing number of products in India. Apart from Foxconn, there are 3 other Apple manufacturing partners in the country at present, including the Indian conglomerate Tata Group.

Similarly, the electric vehicle manufacturer Tesla is also making headway into establishing its manufacturing and supply chain nodes in India. The company is exploring possibilities to bring its auto parts and electronics chain to the country and, in this regard, they have been negotiating with union government officials and talked about getting incentives and tax breaks in the process.

So it is safe to say that the Indian government is actively engaging with global companies with equivalent zeal to foster supplier diversity and explore nearshoring opportunities. In line with the changing dynamics of the global trade landscape, India aims to bolster its manufacturing capabilities while minimizing over-reliance on single sources and geopolitical risks. But challenges continue to surface.

Tesla anticipated factory in India will produce a USD 24,000 car for both domestic sales and exports. However, the potential involvement of Chinese suppliers has posed challenges due to strained India-China relations. To address this concern, Indian officials suggested that Tesla emulate Apple’s approach to supplier diversity.

Apple has successfully embraced a friendshoring strategy, favoring political allies when building supply chains and reducing reliance on single sources, particularly China. India sees this approach as an opportunity to encourage Tesla to collaborate with Chinese suppliers while simultaneously engaging local Indian firms. If all goes according to plan, Chinese vendors can partner with Indian companies through joint ventures – an approach that will allow Tesla to have its Chinese vendors establish a local presence in India, thus, creating a more resilient supply chain without facing the scrutiny that wholly-owned Chinese companies might encounter.

With the never-ending impact of the pandemic, coupled with other global disruptions, nearshoring has become an appealing strategy for many companies looking to diversify their supply chains. The approach entails moving production and operations closer to the home country or end-users, offering benefits like reduced transportation costs and lead times, as well as greater supply chain control.

For Tesla, nearshoring could provide a solution to sourcing challenges and help it establish a reliable supplier base within India. This move could also align with the Indian government’s efforts to boost electronics repair services outsourcing (ERSO) capabilities, which aims to make India the ‘repair capital of the world’.

Collaborating with Chinese suppliers while also nurturing local partnerships can create a win-win situation for Tesla and India. By strategically building resilient and diverse supply chains, India is positioning itself to seize opportunities in an increasingly deglobalized world. With supportive government policies and ongoing efforts to enhance the ease of doing business, India may soon emerge a favourable destination for looking seeking to fortify their supply chains.

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