- According to an analysis by BloombergNEF, around three-quarters of battery cell manufacturing capacity is in China.
- Leaning on China can be done away with in the long run, but right now, it will hurt the customer’s pocket, and could put brakes on India’s EV ambition.
India envisions to replace a significant portion of its conventional internal combustion engine fleet with electric vehicles in the next one decade to control pollution, as well as create jobs in the sector. With the EV sector grabbing the spotlight, especially during the Covid pandemic, there’s one unsettling question that’s floating in everyone’s minds – “Is China steering or weakening the great Indian EV dream?”
Amid the prevailing sentiment around ‘boycott China’ and building an ‘atmanirbhar Bharat’, facts can’t be ignored.
According to the ‘Global EV Outlook 2019’ report released by International Energy Agency (IEA), the global electric car fleet exceeded 5.1 million in 2018, with a whopping 45% of these in China, up from just 8% in 2013, attesting to China’s dominance as the world’s largest electric car market.
“The unfortunate part is India is far behind on the supply side for batteries; there is demand. When we speak of dependence on China, I want to say what’s wrong about it? First of all, we need to segregate the emotion from the business side, we need to segregate passion from pragmatism. Today, when China is far ahead in terms of battery and cell manufacturing, access to lithium, cobalt, nickel mines and demand creation, why can we not utilise their capabilities? shared Kanv Garg*, Director-Renewables & Electric Mobility, Ernst & Young, with The Blue Circle.
Sharif Qamar, Associate Fellow and Area Convenor, Centre for Sustainable Mobility,TERI, shared with TBC, “China has been a key player in the EV ecosystem in India. Its contribution ranges from component and fuel cell supplies to joint ventures with Indian corporations in manufacturing EVs. For instance, BYD, which is one of the largest electric bus manufacturers in the world, had tied up with India-based Olectra Greentech Ltd. to roll out electric buses in the country. The joint venture has a market share of more than 50% in the electric bus segment in India. Even in the electric two-wheeler segment, Chinese companies had planned to invest in a big way.”
According to an analysis by BloombergNEF, around three-quarters of battery cell manufacturing capacity is in China. Of the largest five battery manufacturers globally, two of them are Chinese in origin, and the remaining have manufactured a considerable chunk of their batteries in China. All in all, you can move batteries out of China, but it is next to impossible to move China out of the batteries.
This is a result of years of industrial planning and methodical preparation for dominance in this sector critical to domestic transport, energy policy and national security. India wants to follow suit, but this change can’t happen overnight.
For now, Kanv believes that just like all the major geographies in the world, India must also back its large industrial houses, if they want to create an export-oriented market. EV battery manufacturing is a capital-intensive business and requires a huge throughput to be economically viable, so partnering with the world’s top battery manufacturing players can be a step in the right direction.
“In Japan, after WWII, they backed their industrial houses to go out and capture the world. So has China and US; on EVs, India should back the large automotive players, who are already exporting to the world to go and capture the EV market in the world. If automotive majors do not partner with cell manufacturers, their chances of getting batteries at competitive prices is low. They have to partner and get into collaborations, and for that you’ve to go to the top 5-6 battery manufacturers in the world,” he added.
There are some who argue that alternate battery chemistries might help to reduce this over-dependence on China, but Kanv feels there’s a long way to go, when it comes to maturity.
“Lithium ion technology is not going anywhere, it is there to dominate for the next 5-7 years or so. Cost of manufacturing battery cells on Li-ion is coming down, and today, we are speaking about it because its costs have gone down to reach the commercialisation level,” he added.
The Indian government has been stepping up efforts to drive clean, connected and sustainable mobility initiatives. In March 2019, the National Mission on Transformative Mobility and Battery Storage was established to launch a Phased Manufacturing Programme (PMP) to support setting up of a few large-scale, export-competitive integrated batteries and cell-manufacturing giga plants in India.
Moreover, the vision of the Mission is also to create a PMP to localise production across the entire EV value chain.
Another government initiative – NITI Aayog’s Advanced Chemistry Cell and Battery Gigafactory plan extends incentives close to $25/kWh to manufacturers. The other objective is to disincentivise the high-scale import of electric vehicles and associated components, thereby giving the right push to the ‘Make in India’ campaign.
Kanv commends the government for rolling out the DHI FAME scheme around EVs, as well as phased manufacturing. While these are critical steps to steer domestic manufacturing in India, it is important for the government to reflect and define their EV ambition, he feels.
“China set out with an ambition that they wanted to control the battery supply chain and they made their industrial policy according to that. I am not clear what we want to do with EVs – do we want to be the manufacturer for the world or do we just want to be a demand side market?” The second thing is whether it’s because of Covid, or conversations around being atmanirbhar, I think it has given a very positive chance to the industry to step back and think about it; it has given a chance to states, to the central government to form conducive policies around it. The execution of a policy always happens at a state level – transport, like power, is a concurrent subject. While the central government has formed conducive policies around EVs, the execution at the state level is very limited,” added Kanv.
Ramping up Domestic Manufacturing
While India can’t completely give up on its dependence on China, there are some baby steps the industry is taking. A joint venture called Khanij Bidesh India has been formed between three state-run companies – National Aluminium, Hindustan Copper and Mineral Exploration Corp. – to acquire lithium and cobalt mines overseas.
Additionally, Amara Raja Batteries, the country’s second-biggest traditional battery maker by value, will build a lithium-ion assembly plant, while Suzuki Motor along with Toshiba and Denso is setting up a lithium-ion battery manufacturing plant.
There were several other investments underway in the EV industry, but in the current geopolitical scenario, some would be difficult to fructify, shared Sharif.
“However, the Indian automobile industry should look at it as an opportunity, and with adequate support from the government, should go all out for indigenization. In the short run, the cost competitiveness of EVs would deteriorate and, therefore, the government should support at least the ‘low-hanging fruit’ segments like two-wheelers, three-wheelers, and buses. In the long run, it becomes imperative for the bigger manufacturers to expand their EV portfolio, which would help India’s indigenization effort significantly. The announcement of Phase III of the FAME scheme or an extension of Phase II, at this stage itself, would boost the confidence of all the stakeholders, especially manufacturers and component suppliers,” he added.
Alekhya Datta, Fellow and Area Convenor, Electricity and Fuels Division,TERI believes that battery manufacturing offers an opportunity to redeem untapped potential starting from raw material acquisition, manufacturing, assembling to recycling and reusing.
“India’s cumulative battery requirements, between 2026 and 2030, will be at least 2,410 GWh. Assuming that India will be manufacturing both cells and packs while importing only cathodes (depending on technology used), India stands to capture nearly 80% of the total economic opportunity, an economic value of INR 9.3 to 13.7 lakh crore,” he shared with TBC.
The Last Word
Leaning on China can be done away with in the long run, but right now, it will hurt the customer’s pocket, and could put brakes on India’s EV ambition.
“If we stop the private sector from not importing from China, and because of not importing from China, the cost of your vehicle goes up by 20%, will the consumers buy it or will the government cover this cost?” said Kanv.
Becoming atmanirbhar is a long-term mission, but this can’t happen overnight. Self-sufficiency comes on the back of implementation-driven industrial policy, and working towards an ambition. Currently, it is beneficial to adopt a collaborative mindset than completely shooting down the possibilities to partner.
“China has invested in this space as a country. They have seen this disruption coming 20 years back, and they have invested into these things. So, what is wrong with them reaping the benefits? If they are driving down the costs of batteries globally, and also deploying electric buses (99% of electric buses are from China), then we must tap into that. I want my country to do well, but there’s no way we can avoid China,” concluded Kanv.
(Edited by Anu Choudary)
*Contributor’s views are personal and do not represent the views of any organisation in particular.