Localisation: An Impetus for the Indian EV Industry

India is painting a golden picture for the EV industry, with a wider resonance among the citizens of the nation. Every industry is bound by certain obligations and opportunities, and the EV industry is following the trail.?

In a bid to make India self-reliant, the government of India took the initiative of ‘Atmanirbhar Bharat’. The scheme pushes the industry to manufacture the components domestically, to develop a robust and competitive local supply chain for EVs. To escalate EV adoption in India and position the nation as a value-chain member, the government of India should encourage private investments in addition to extending subsidies. The above is already being complemented with the FAME scheme, wherein the programme’s objectives promote EV adoption, amplify local manufacturing, and provide manufacturers with incentives to fabricate EVs in India. A PLI programme is also targeted to entice businesses to commence producing EV batteries locally.?

However, amidst the striving, the Indian market is price-sensitive and purchasing costs remain a consistent problem. This gives rise to a weighty impact of localisation. Pricing is a crucial factor in picturing the future of EVs in India, be it in terms of upfront vehicle costs, components costs or battery costs. Currently, India depends on imports for battery production, which comes with exorbitant costs.?

Lithium-ion Batteries:

EVs cells are the most integral part of the e-mobility value chain but the Indian EVs industry bears an overreliance on imports, finite access to raw materials, and inadequate local manufacturing, and refining capacities.?

Lithium-ion batteries are the ruling technology for the EV transportation sector owing to their minimal self-discharge, high energy density, speedy charging, and lightweight design. However, China maintains most of the lithium and this generates a prominent challenge for the Indian EV industry.?

While India’s Lithium-ion battery demand is projected to surge from the current 3 GWh to 20 GWh by 2026 and 70 GWh by 2030, 70% of the requirement is imported from China and Hongkong.?

Indian EV Industry’s Grappling with Supply Chain Gap:

In recent times, the auto supply chain has undergone capacious pressures. In particular, the production of EV components (like cells and semiconductors) suffered major disruptions, and then there were geopolitical tensions, owing to the covid19 outbreak. Consequently, EV OEMs had to prioritise short-term measures to maintain supplies while procurement costs and country of origin were pushed to the backseat. However, OEMs need to pull up their socks to ensure a readily available robust domestic supply chain.

• Localisation has always been a crucial mandate for India’s automotive sector. As a comprehensive strategy, it could aid OEMs to fix conventional obstructions like near-shore development for the new product development (NPI) process.?
• The strategy could promote agility and control over the supplier quality-cost-delivery (QCD).
• It can also enable optimised logistics costs and adequate inventory stock.?

Although the Make in India policy, Phased Manufacturing Plan (PMP), FAME, and PLI were launched to promote domestic manufacturing, the EV supply chain has not been able to localise at a rapid pace. While OEMs have been leading Tier-1 localisation through limited local value addition on some components, ideal Tier-2 and Tier-3 localisation have yet not been realised. This has been made difficult due to the nature of components and their available ecosystem in India. A normal bill of material (BoM) of conventional fuel-driven counterparts is notably different from that of an EV. Therefore, certain amendments are required. However, it is motivating to see e-two-wheelers and e-three-wheelers spearheading the penetration of EVs amidst the compromised supply chain gaps.?

Poor Reserve of Raw Materials; a cause of concern:

One of the most dominant EV industry challenges is India’s inferior access to prime raw materials like nickel, lithium, cobalt, and manganese, which comprise 80% of the total cell cost. The shortage arises owing to the natural reserves being concentrated in a few countries and India’s incapabilities for refining these materials.?

Therefore, localising the Lithium-ion battery supply chain is a paramount driver to fulfil India’s endeavour to become self-reliant and a global EV manufacturer and exporter.?

Fixing the Problem:

• To combat the dependency, India needs to invest over USD 10 billion to augment cell manufacturing and raw material refining, to fulfil the domestic demand for li-ion batteries by 2030 which could also create over 1 million jobs and bountiful opportunities. As a comprehensive solution, native EV battery manufacturing will accelerate local EV adoption and position India as a large export hub globally.
• The government and the industry ecosystem must work in cohesion and collaboration to foster a self-reliant, independent local EV value chain with esteemed battery manufacturers, traditional industry players, OEMs, and new-age start-ups. Adding on, the situation demands large investments in R&D partnerships, joint ventures, foreign direct investment inflows, and global alliances to fabricate a strong supply chain and robust acquisition of raw material resources across geographies for self-sufficiency in battery production. On the consumer’s part, a strong demand can help India become a global EV powerhouse.?
• The Union Government should work on multiple fronts to localise the supply chain for batteries, enabling easier access to raw materials like cobalt, lithium, nickel, and manganese for indigenous manufacturers.
• As an all-inclusive approach, policy coordination and design for end-of-life EVs must also be introduced, regarding urban mining and EV battery recycling, to mindfully reuse the valuable metals in car batteries.?
• There must be a stringent regulatory push to reduce the dependency on supply chain inconsistency, which will further essentialise and incorporate localisation in the production of EVs.?

India is Destined to become an EV Global Leader:

India is at the cusp of revamping the battery manufacturing and recycling ecosystems, which will further bring augmented growth opportunities for a prosperous future of the EV industry. A powerful localised value chain can provide numerous inherent advantages to the stakeholders of the industry and be a key pillar toward reducing CO2 emissions, savings on raw materials and neutralising the loss of jobs from traditional counterparts, thereby contributing to national productivity. Currently, enhancing bilateral relations and investments in countries with abundant natural resources of raw materials, incentivising local players, promoting sustainable graphite mining with the loosening of binding regulatory restrictions, amplifying import duties on cells and batteries, tax subsidies, PLI/ incentivising, manufacturing, and recycling of batteries, development of Special Economic Zones/lithium parks and valuable regulations will expedite the momentum of cell manufacturing localisation. Once EV penetration conquers a reasonable mass and a significant spend is invested on the required components, OEMs will certainly get an organic pull from localisation actions.?