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Boosting EV Manufacturing

  • 21 Feb 2022
  • 9 min read

This editorial is based on “Jumpstarting Electric Vehicle Manufacturing in India” which was published in Hindustan Times on 19/02/2022. It talks about the challenges of Electric Vehicle Manufacturing in India.

For Prelims: Electric Vehicles (EVs), Domestic EV Manufacturing, Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles Scheme-II (FAME-II), PLI schemes automobile, automotive components and Advanced Chemistry Cell (ACC).

For Mains: Electric Vehicles Manufacturing and Adoption - challenges and opportunities, EVs and Global Goals of Net Zero Emission.

Electric Vehicles (EVs) are the latest automotive trend and all developed and developing nations are encouraging the switch to EVs from conventional Internal Combustion Engine (ICE) vehicles.

The EV technology is attracting eyeballs worldwide for the simple reason of reducing dependency on fossil fuels and achieving the global goal of zero carbon emission and sustainable development.

India’s growing market for EV mobility, particularly in the two and three-wheeler segment, offers a significant opportunity to transition India’s road transport sector towards a low carbon pathway.

The sector has potential to create more jobs, reduce local air pollution and crude dependence. However, these opportunities can only materialise if policymakers and stakeholders in India’s EV sector recalibrate their focus towards building local and more resilient supply chains.

Electric Vehicles in India

What is the Current Scenario of EVs in India?

  • EVs currently account for less than 3% of all vehicles sold in India. This is despite EV registrations crossing 50,000 units for the first time in December 2021, the highest ever monthly sale recorded.
  • Although 80% of the volume of EVs sold is occupied by low-cost and low-speed three-wheelers, overall EV sales have picked up pace due to the rise of next-gen two-wheeler companies.
  • As per the Accelerated e-Mobility Revolution for India’s Transportation (e-AMRIT) portal in India, only 7,96,000 EVs have been registered till December 2021, and just 1,800 public EV charging stations have been installed.
  • While there has been a growth of 133% in the sales of EV from FY 2015 to FY 2020, when compared to sales of conventional ICE vehicles, the numbers seem insignificant. In FY 2021-22, only 1.32% of the total vehicles sold in the country were electric.

What Recent Measures have been taken regarding EV Manufacturing?

What are the Challenges to EV Manufacturing?

  • Supply Chain Disruption: The last two years of supply chain disruptions due to the Covid-19 pandemic and the US-China trade war have precipitated fundamental changes in global manufacturing strategies.
    • This is particularly true of high-tech industries that continue to face logistical headwinds, including shortages of critical components like silicon chips and batteries.
    • India’s big automobile companies also had to stop production owing to shortages of chips, like those that power new multimedia features in the vehicles.
  • Expensive Materials: The consequence of supply chain disruptions and the race to shorten supply chains, is that critical components are becoming prohibitively expensive.
    • In the case of EVs, Indian manufacturers are also struggling to source lithium-ion batteries, which are largely imported from China, South Korea and Taiwan.
      • Prices for battery-grade lithium carbonate, a key input, went up 400% year-on-year in November 2021.
  • Import Dependence for Raw Materials: India does not possess critical raw materials such as lithium, cobalt and nickel, which are used to make lithium-ion (Li-ion) battery cells.
    • Consequently, Indian manufacturers must rely heavily on imports of battery cells from China, Japan, Korea, and Taiwan, and assemble them into battery packs.
    • Although India has received an encouraging response from investors under the PLI scheme to manufacture ACC batteries domestically, most bidders are expected to start manufacturing only from 2025.
      • So, India’s import-driven strategy, for the domestic assembly of critical battery packs, will continue for a few more years.

What Can Be The Way Forward?

  • Increase Competitiveness: Automobile industry majors must act fast to ensure the future competitiveness of the Indian EV ecosystem, which relies heavily on imports.
    • Indian automobile majors would do well to shore up supply chains and upgrade capacities within and between different manufacturing clusters.
  • Two-Wheelers for EV Headstart: The two-wheelers offer a good opportunity to localise EV component manufacturing. This segment already accounts for nearly half of all new passenger EV registrations.
    • India is already the largest two-wheeler manufacturer in the world, and the bids to set up battery gigafactories indicate a healthy appetite for new-age technologies that can help shorten supply chains.
    • It’s time the bigger companies wake up and jump-start their EV ambitions.
  • Battery Manufacturing - Key Focus: India needs to focus on building a supply chain, primarily by manufacturing batteries domestically and bringing down the cost of EVs in India.
    • Recently Tesla Inc. has incorporated an Indian subsidiary - Tesla India motors and Energy Private Limited with an aim to eventually set up a manufacturing unit in India wherein Tesla cars will be locally produced.
    • Similarly, India needs to attract foreign battery manufacturers as well as domestic players to set up local production facilities. Such measures would lower the cost of batteries and EVs, improving the cost competitiveness.
  • Mining Urban Waste: Recent commitments by Indian industrial houses (Reliance Industries, Adani Group, and Tata Chemicals) to locally manufacture battery cells is reassuring.
    • However, there is an urgent need to calibrate strategies on battery development by working in a closed loop.
    • Manufacturers need to think about the life cycle of batteries and formulate plans to mine urban waste to ensure that precious materials can be extracted from batteries.
      • This strategy has the potential to save up to 50% of materials required to produce new batteries.

Drishti Mains Question

Discuss the steps that can be taken to boost the manufacturing of electric vehicles in India.

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