The last few months have sparked several conversations around the increased adoption of electric vehicles, post-Covid. It has also led the industry to reflect on pertinent issues, including the indigenisation of EV manufacturing and supply chain.
The EV supply chain can be segregated into two parts: battery and components.The battery piece constitutes almost 50% of the cost of the vehicle. These batteries contain five primary metals – aluminium, copper, cobalt, iron and lithium, which means the battery manufacturer is heavily dependent on the minerals.
Most of these minerals are concentrated in certain parts of the world and are not available in plenty. The refining places are also geographically concentrated, and there are several bottlenecks in cell and cathode manufacturing. There is also significant dependence on imported components and other parts.
In an exclusive webinar ‘Deep dive into EV Manufacturing & Supply Chain’ organised by The Blue Circle, reputed leaders in the EV space – Diego Graffi (CEO and MD, Piaggio Group), Rajeev Chaba (President and CEO, MG Motor India), Roger Atkins (Founder, Electric Vehicles Outlook), Sohinder Singh Gill (CEO, Hero Electric India and DG, SMEV) and Pavan Choudary ( Author, CEO and Public Intellectual), discuss the indigenisation of the EV supply chain and manufacturing – its challenges, solutions, and the outlook in the next three years.
The Tale of Two-wheeler Batteries
According to a ResearchAndMarkets report, the two-wheeler market in India is forecast to reach a sales volume of 24.89 million units by 2024, from 21.19 million in 2019.
With the atmanirbhar sentiment growing stronger in the country, the focus is on having made-in-India batteries for two-wheelers, a component that decides the price of the vehicle, and thus also its adoption.
Sohinder explained that the nature of two-wheeler batteries is different from the rest, in terms of its compactness and high density. “They are very stressed because we try and use every drop of the battery, since two wheeler power is limited.”
He also pointed out that the players who manufactured batteries a few years ago were not in the right mindset to create small lots and many varieties of batteries.
“I believe the government is very serious in setting up 7-8 plants in the next two years with some incentives from their side, so that cell manufacturing starts.”
Trials and Tribulations of Three-Wheelers
Italian auto major Piaggio made its foray into the electric vehicle segment in India with the launch of a three-wheeler model in the country. The company has tied up with Sun Mobility for battery and charging infrastructure.
On the use of three-wheelers, Diego shared that these vehicles are typically used for business purposes, and not passenger commutes.
There are several challenges though, including the application of electric technology that has a high cost, which is not sustainable at the moment.
“We also need more indigenisation of components here in India and less dependence on imports,” he added.
Pavan added that the biggest pinch point here is not the battery, but the vehicle itself. “Sometimes, three-wheelers are purchased because of an economic decision, a person goes for cheaper options rather than the best one. Financing options are not fair.”
The Curious Case of Cell Manufacturing
“When you talk of assembling in India, initially you can do modules, and from modules, you can go to cells, because everybody imports cells right now. So when you do the assembly, you still have a lot of value addition there in terms of battery management system, thermal management system. Localisation of components is another possibility. Cell manufacturing is the last thing in the value chain, as far as car batteries are concerned.”
The Trend of Giga Factories
Rajeev, while shedding light on the trend of giga factories to manufacture electric batteries (popularised by Tesla) and dominated by five global players in the world, said, “I think Indian players need to collaborate with them since local demand will not be there for the next few years.”
Echoing Rajeev’s point of view, Pavan shared that cells can’t be manufactured overnight unless there are large-scale investments, and in the new post-Covid geopolitics,it is important for India to look for substitutes of minerals, especially those that are available in plenty and are more affordable.
Countering Rajeev, Roger shared that while these five companies dominate the giga factory landscape, heavy reliance on them is dangerous, especially when it is about the fundamental component of an EV – the battery.
Roger further stated that while the focus today is on self-sufficiency and switching to a circular economy, it must be about assessing the ‘art of the possible’ rather than the grand ambition.
He also suggested wireless charging, as an alternative to battery, for high utilisation vehicles like buses and trucks.
Rajeev underlined that this is the time to categorise components in a few buckets and pick the low hanging fruit such as batteries, inverters, cables, chargers.
“Cells are not a priority, unless the government decides it’s strategic.Urban mining of minerals as well as second life cycle management of the battery is another part of the supply chain that people can take advantage of.”
Insights on Incentivizing
In the case of two-wheelers, Sohinder talked about three kinds of customers, one who is looking for an affordable vehicle, another a second-hand vehicle, and the third who wants a premium experience. The first two are looking for direct incentives, but are still looking for some assurance from the government. The question floating in their minds is if there are hardly any EV vehicles on the road, why should I be the first one?
“So here, the tipping point, especially for the customer looking for a second hand vehicle, would be a sweetener. The incentive will work like a sweetener; but it has to be heavy enough to work. Through this heavy front loading you can convert a huge population,” asserts Sohinder.
Roger countered, “The problem with incentives is that they come and they go under democratic governments, you don’t get consistency like we have seen in China, for example. So I would suggest focus should be on the commercial vehicle sector and the commercial fleet segment. The adoption will be faster not for cleaner air but because it makes economic sense since EVs are going to be much cheaper to operate.”
He also feels that more than providing incentives for passenger cars, that same incentive must be given to a taxi or bus operator, who carries hundreds of passengers. “The return on investment is in making more electric miles,” he added.
Rajeev believes that just like a baby needs hand holding when he is born, the EV industry needs support at this point. It needs a well-structured policy for at least the next 15-20 years.
Reducing the dependence on fossil fuels and clean air are part of the national agenda, and EVs are a definite answer to both these issues.
To conclude – a sweetener for the two-wheelers – As per TBC’s Electric Vehicles CXO Webinar Audience Poll, 61% of the leaders believe that manufacturing of two wheelers can indigenise the soonest in India.
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