Slowing Chinese imports may delay automakers' electric vehicle target

Support from Centre on alternative fuel technologies and batteries holds key

Rising anti-Chinese sentiments may push automakers’ electric vehicle (EV) plans on to the slow lane, with imports from the country set to hit a snag. Incidentally, the world’s biggest component makers for EVs are Chinese.

Market leader Maruti Suzuki (MSIL) says the impact could be offset by strong state support for other technologies like hybrids, which the industry has been pushing for but hasn’t received.

C V Raman, senior executive director (engineering) of MSIL, said: “The government is primarily supporting battery electric vehicles (BEV), whereas equivalent support to other EV technologies (strong hybrid and plug-in hybrid) is missing. Further, the industry has worked for three decades to establish an internal combustion engine (ICE)-based ecosystem, because of which we achieved very affordable cost levels.”

Similar support could help BEV adoption. “Government support by way of long-term policies can aid in development of an ecosystem, R&D, and a supplier base — similar to ICE vehicles — and provide fiscal and non-fiscal incentives to generate consumer demand,” he added.

“China captured above 60 per cent of the global EV supply chain, right from mining of rare earth minerals to manufacturing and supplying of battery cells or modules, and key components like DC motors, inverters, converters, and control systems,” said Suraj Ghosh, principal analyst (powertrain forecast), IHS Markit.

In markets where EVs have achieved significant penetration, the drive came from either huge ‘incentivisation’ schemes, or strict CO2 regulations.

“In India, the govt’s EV promotion scheme — FAME 2 — isn’t enough to entice carmakers or tech suppliers to make investments in this area, even though GST has been lowered to 5 per cent,” Ghosh added.

“Nor are CO2 regulations strict enough to push OEMs to include pure EVs in their product mix.” MSIL’s sells two hybrid models — Ciaz and Ertiga.

Kaushik Madhavan, vice-president (mobility practice), Frost & Sullivan, says the dependency on imported EV components will continue before sufficiency kicks in. “Strong hybrids will not fill the gap for a couple of reasons. First, two energy sources are more complex to integrate and manage than one. Second, a hybrid is prohibitively expensive.”

What would propel technological advancement is strong encouragement by the state for EV-related battery technology manufacture. Kavan Mukhtyar, partner and leader (automotive) at PwC, says hybrids come with a ‘sin tax’ of almost 42 per cent over their cost, making them unviable.

Last year, MSIL tested over 40 prototype EVs, the insights from which will be used to develop a suitable EV. “MSIL aims to expand its range with various electrified powertrain options (mild hybrid system, strong hybrid and electric vehicles),” said Raman. 

“The firm aims to offer fuel-efficient electrified powertrains starting with hybrid technologies, and gradually upgrade customers to fully electrified powertrain options,” he added.

Crude oil imports account for 20 per cent of India’s total import bill, and reliance on oil means it will continue to grow.

Before Covid-19, “It was estimated that India would have a 70 million car parc by 2030, growing at 8 per cent CAGR. If we consider 20-30 per cent annual EV penetration by 2030, ICE vehicles will be 83 per cent and EVs will have 17 per cent share of the total parc,” said Raman.

Therefore, he feels a comprehensive approach with simultaneous focus on ICE powertrains, as well as promotion of alternative fuels (CNG, Ethanol, and Methanol) along with BEVs, is required to reduce oil imports.

High acquisition cost and infrastructure are major challenges for BEVs. For instance, Hyundai’s compact all-electric SUV ‘Kona’ starts at Rs 23 lakh, while MG’s ZS starts at Rs 20 lakh. However, both vehicles are at least 60 per cent more expensive than traditional fuel cars of the same size and class.

Tata Motor’s Nexon EV ranges from Rs 15-17 lakh. Shailesh Chandra, president (passenger vehicles business unit), says the firm is collaborating with Tata Power and Tata Chemicals to build chargers, lithium-ion battery cells, and to explore active chemical manufacturing and battery recycling.

“In addition, we have collaborated with Tata Autocomp for localisation of the battery pack assembly and motor assembly,” he said.

However, it all hinges on policy change. “Unless policy-making evolves, the Indian EV market may not have volumes for a large-scale domestic technology and supplier base, and without scale, the sector cannot become cost-competitive,” said Ghosh.

This could drive the two-wheeler and three-wheeler segments to usher in mass EV mobility for now.