100% Made in India electric vehicles a long distance away: Industry

Dependence on China will continue and it will take years to realise the government’s goal of having electric vehicles manufactured entirely in India, say executives.4 min

The government last week urged local carmakers to curb imports of electric-vehicle (EV) components and other automotive parts from China and instead set up up manufacturing facilities in India.

However, despite the government’s call, industry participants say the country’s dependence on imports from China is not likely to reduce anytime soon as it will take a minimum of 3-5 years to step up the manufacture of EV components in India.

Lack of scale

Currently due to the small size of the electric vehicle industry and lack of mass production of electric vehicles, most companies import parts from China and other countries. The EV market in India makes up only 1 percent of the total sales of the auto industry.

“The ecosystem in India for (the manufacture of) electric vehicles is not so robust, and therefore you have quite a few components being imported, like parts of the drivetrain, battery, battery components, etc,” Automotive Component Manufacturers Association (ACMA) of India Director-General Vinnie Mehta told Money control.

Mehta added that as there aren’t any mass producers of electric vehicles in India at the moment, even conventional parts that can be produced locally are imported due to the lack of economies of scale.

He said that currently, around 70 percent of components to manufacture electric vehicles are imported from other countries, including China and Taiwan. However, Mehta said that as EV volumes rise, the local component industry will be capable of supplying indigenous parts.

Mehta’s comments were echoed by Maruti Suzuki India Ltd’s Chairman RC Bhargava last week. Bhargava while speaking at the 61st annual convention of the Society of Indian Automobile Manufacturers said that Indian customers looking to purchase entry-level vehicles do not have the financial heft to buy EV complaint to European standards and the Indian market is predominantly comprised of customers looking to buy entry-level vehicles.

“Electrification can only happen at large scale in India when the customer finds it is in his interest to buy an electric vehicle rather than an internal combustion engine,” Chairman of Maruti Suzuki India R C Bhargava said last week. “Given the state of infrastructure in various areas, this process will take some time and the internal combustion engine vehicle will continue to be in production for many, many years,” Bhargava said.

He added that Maruti is looking to launch an EV in the market in the short term, and asked the government to consider alternatives like CNG and hybrid vehicles as well to reduce pollution from vehicles.

Shailesh Chandra, President of Tata Motors’ passenger vehicles business, also said today that at the current price of batteries, creating affordable hatchback vehicles (regarded as entry-level vehicles) for the Indian market remains a challenge.

He added that the company’s decision to develop its new EV (Tigor EV) in the sedan segment was due to the higher bandwidth of price competitiveness available in the segment.

India’s EV market may be small but it has huge growth potential. Ravneet Phokela, Chief Business Office at Ather Energy, one of the biggest electric two-wheeler makers in India, said that the government has addressed quite a few concerns of the EV industry in India. “The only thing we import from China is cells, because India has no cell production,” said Phokela.

Dependence on China

ACMA in its presentation for 2020-21 said that imports of auto components dropped 11 percent to Rs 1 lakh crore ($13.8 billion) in 2020-21 from Rs 1.12 lakh crore ($15.4 billion) a year earlier. However, the share of imports from China declined only 1 percent in 2020-21.

Nearly, 29 percent of all the imports of the Indian automobile industry come from China, including key components used in engines, wheels and electric vehicles.

China is the key supplier for the sub-components used in engines, electronics, alloy wheels, tyres etc. It also supplies key components for EVs, including lithium-ion battery cells.

A look at import data from the Department of Commerce shows that Indian industry imported monolithic integrated digital circuits worth $1,966.7 million from China in 2020-21.

Similarly, the country imported lithium-ion cells worth $700 million, parts of rotating electronics worth $165.1 million, and switching diodes worth $65.1 million from China in 2020-21.

Most of the electronic parts imported from China are used by the Indian EV industry, white goods industry, and the electronics industry.

Hurdles in localisation

The biggest hurdle for the Indian EV industry remains its dependence on China for batteries or Advanced Chemistry Cell batteries, as the country has no cell production.

Phokela said that while the government’s Rs 18,100 crore production-linked incentive scheme for manufacture of advanced chemistry cell batteries may not have an immediate impact on the EV ecosystem in India, he expects battery manufacturers to set up shop in India over the next five years.

While India’s government is pushing local automakers to shift to EVs, the shift is happening far more slowly than in other countries. Some Indian legacy automakers are hesitant to make the switch due to scant charging infrastructure and the high price of electric models.

The entry of large auto players such as Tata Motors, Mahindra & Mahindra, TVS Motor, and Bajaj Auto is seen as a boost for the EV space in India as these companies have the capability to increase production volumes, Mehta said.

He added that the government’s initiatives, such as the Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME-II) scheme, along with the EV policies of States, are expected to boost production of EVs, especially two-wheelers, buses, and three-wheelers.

Phokela said that the government has addressed the demand for electric vehicles in the country by introducing subsidies under the FAME-II scheme, as well as through subsidies given out by individual States.

He added that even on the manufacturing side, the government’s production-linked incentives had made it easier for automakers to produce EVs. However, he added that the government should now look at providing incentives to automobile dealers to open showrooms and push sales of EVs at the ground level.

The government could also look at inviting foreign players to set up shop in India by cutting import duties. The import duty on EVs in India is 100 percent if the CIF (cost, insurance, and freight) value is more than $40,000, and 60 percent if the CIF value is less than $40,000

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