New Delhi: India’s electric vehicle (EV) is in a churn as domestic vehicle OEMs have already lined up hundreds of thousands of crores in the development of local supply chains while the government looks to attract global EV manufacturers with sops.
This peculiar situation has generated concerns over a level playing field for domestic vehicle manufacturers – many of whom have been privately expressing alarm at the concessions the government may roll out for attracting companies such as Tesla and Vinfast to manufacture EVs in India.
A senior executive at one large OEM said that the government appeared “very keen” to get global EV companies to manufacture in India and the industry would be drafting a representation, seeking a level playing field. He said that industry lobby group, Society of Indian Automobile Manufacturers (SIAM) was holding internal discussions on this issue and that many OEMs were unhappy with the reported sops being considered for Tesla and Vinfast.
Among the concessions the government is believed to be considering for these OEMs is said to be a time-bound approval for import of some critical EV components like batteries. For EVs, batteries account for nearly 40% of the vehicles’ cost.
And since multiple Indian OEMs have already either announced significant investments in assembly or cell level manufacturing of EV batteries or are in the process of doing so, this raises a question mark over the domestic industry’s enthusiastic localisation moves.
An industry expert pointed out that by 2030, on an annual basis, India will need 200-250 Giga Watt Hours (gwh) of domestic battery capacity for use in EVs and for storage. “We have almost zero as of now. This includes battery cells needed for 2, 3, 4 wheelers, buses and for storage…. There is just hype about Tesla. Why do we need a Tesla? We are not a country with deep pockets or resources. The best way to use our limited resources is to build domestic businesses better – make sure Indian OEMs are given concessions to expand their manufacturing base in India as well as overseas,” this person said, requesting anonymity.
Big domestic investments on battery localisation
Suzuki Motor Company, the parent of India’s largest car marker Maruti Suzuki India, has now firmed up two separate facilities for batteries. One is TDSG, a three way joint venture between SMC, Toshiba and Dentsu in 50:40:10 ratio, which has a six million cells per annum installed capacity in Gujarat. This is India’s first Li-ion cell and battery manufacturer and Maruti is buying battery packs for its hybrid vehicles from TDSG besides also exporting these to Europe and Indonesia.
This plant manufactures the Lithium-Titanium-Oxide battery for use in hybrids and after the initial investment of INR 1200 crore, the JV has raised the total investment to INR 3700 crore.
The second battery facility of SMC is also coming up in Gujarat, through Suzuki R&D India. The investment here is INR 7300 crore for cell and battery packs and this facility will exclusively make batteries for the Maruti EV slated for launch in FY 25.
Meanwhile, Hyundai Motor India has earmarked INR 20,000 crore investment to “make further inroads into EVs and modernise its vehicle platforms” in a phased manner over the next decade, Chief Manufacturing Officer Gopala Krishnan C S told ETAuto. The company plans to establish a state-of-the-art battery system assembly unit, with an annual capacity of 150000 units, in Tamil Nadu.
Tata AutoComp had entered into a joint venture with Chinese company Gotion “to Design, Manufacture, Supply and Service Li-ion Battery Packs for Electric Vehicles in India” about four years back. Gotion China is a leading Battery Cell and Battery Pack manufacturer in the Chinese market with multiple facilities in China. According to industry sources, this JV sources battery cells for Tata EVs from China and battery packs are then assembled at its Pune facility.
Mahindra & Mahindra also has a tie up with South Korean company LG Chem where the latter develops “a unique cell exclusively for India application and will also supply Li-ion cells based on NMC (nickel-manganese-cobalt) chemistry with high energy density. These cells will be deployed in the Mahindra and SsangYong range of Electric Vehicles. LG Chem will also design the Li-ion battery modules for Mahindra Electric, which in turn will create battery packs for the Mahindra Group and other customers,” as per a statement issued at the time this tie up was announced.
Incentives for local firms
On its part, the government has been encouraging electric vehicle manufacturing through two editions of the Faster Adoption & Manufacturing of Hybrid and Electric Vehicles (FAME) schemes where purchase subsidies are offered for specified vehicle categories. Also, an Advanced Chemistry Cell (ACC) battery production linked incentive scheme is in place to incentivise setting up of 50 GwH of battery storage capacity with an investment of INR 18,100 crore.
“Under the said initiative the emphasis of the government is to achieve greater domestic value addition, while at the same time ensuring that the levelized cost of battery manufacturing in India is globally competitive,” an official statement had said earlier.
Korean company Hyundai (not the car maker), an arm of Reliance Industries, Ola Electric and Rajesh Exports were the selected applicants under the scheme. Of these, Hyundai walked away and industry sources now say that the government is looking at conducting a rebid to offer the remaining battery storage capacity.
But such incentivsaition for developing a local EV component base is not adequate enough for many OEMs. Rahul Bharti, Executive Officer Corporate Affairs at Maruti, told ET Auto that “SMC is putting up the cell and battery plant (through Suzuki R&D India) but did not avail of the ACC PLI scheme as the localisation of 60% was slightly difficult to reach. We understand that there is another ACC PLI scheme under consideration of the government. If and when it comes, we will evaluate it”.
Sharvari Patki, Program Head at WRI India, said that for accelerating the battery PLI scheme, close collaboration between the government and the industry is required.
China dominates global battery ecosystem:
A bulk of the investments announced by domestic OEMs in battery manufacturing are really in assembling battery packs, with cell level investments few and far between. This is due to the vice-like grip of China over global supplies of critical raw materials and battery cells. For the Indian OEMs to become competitive, local R&D needs to be encouraged and incentivised by the government.
Srihari Mulgund, EY’s New Age Mobility Partner, pointed out that we need to ensure commercial viability of domestic battery cell manufacturers, encourage local R&D so that locally available materials can be used. “If foreign cell manufacturers are keen to enter India, there should be certain technology transfer clauses to ensure our domestic capabilities get built in return for market access,” he said.
Patki of WRI India said that a clear policy roadmap should be formulated to address supply chain challenges and establish a robust battery recycling ecosystem to ensure a circular battery economy.
Domestic OEMs are hoping to get a level playing field so that further investments in the EV ecosystem keep coming in. Is the government listening?