The Biggest Problem with the EV Industry in India

The word ‘Industry’ carries a lot of weight. In the Cambridge Dictionary ‘Industry’ is defined as follows “the companies and activities involved in the process of producing goods for sale, especially in a factory or special area”. As per the definition of Oxford Learners Dictionary ‘Industry’ is “the production of goods from raw materials, especially in factories”. As we can see manufacturing in a factory scale is the integral part of an Industry. 

A Short Case Study

The true example of a successful Indian industry would be the internal combustion engine motorcycle industry. We have been able to build the entire ecosystem required to manufacture a motorcycle. The components are mostly manufactured in India by the parent companies or through MSME vendors. Every major brand invests a lot of money in Research and Development. Products are made considering the needs and the demands of the Indian consumers. 

Let alone the manufacturing ecosystem the competitiveness keeps the market vibrant. While companies like Hero Motor Corp, Bajaj Auto, TVS Motor provides Indian consumers with reliable everyday vehicles companies like Royal Enfield, Duke, Yamaha Motors offer products for a niche market. Consumers also get the opportunity to taste the offerings by the International brands like Hayabusa, Kawasaki Ninja and Harley Davidson. The challenge in the market keeps the companies on their toe. They strive to improve their products and services.

The Million Dollar Question

But, when it comes to the Electric Two-Wheelers we hardly find a similar competitive market situation. The innovation is limited. We observe marginal improvements in the products. In many cases even the products hardly varies from brands to brands. The million dollar question is why is the situation the way it is?

The Painful Truth

The answer is simple and painful. We do not have a proper manufacturing ecosystem for the EV industry in India. Today over 90% of the electric two-wheelers sold in India are manufactured in and imported from China. Our EV industry is highly import-dependent. 

It is true that we do not produce most of the raw material (apart from Iron and to some extent Aluminum) required to build EVs. Whether it is copper, magnesium, cobalt, polymer or lithium we have to import all of them if we are to start manufacturing. But on the other hand China does not produce most of the materials either.

Chile is the largest producer of Copper ore, Congo is the largest producer of Cobalt, Polymer is a byproduct of the oil industry. The Middle East and USA currently dominates oil industry. Lithium is produced in the South America. China tops only in Magnesium mining. But we must understand that China invested heavily in the African and Latin American countries. Now they literally own the mines required to dominate the EV industry.

A Scope for Strategic Planning

India is lagging behind despite its cordial relationship escalated through the diplomatic channels. If India needs to shine in the EV era we must seriously consider manufacturing EVs in a sustainable business construct. We must invest heavily in the R&D front as well as build partnership with African and Latin American countries with long-term vision.

Import-dependency not only hikes the price of EVs but also discourages employment by restricting the scope and motivation for manufacturing. When we import the EVs we pay various extra charges such as the profit margin for the Chinese farms, Chinese Taxes, Shipping charges, import duties, transport cost, margin of the importer, Brand, distributor, dealer and the retailer. We can easily cut three to four middleman if we focus on manufacturing.

Optimism May Prevails

With established companies and StartUps seting up manufacturing units in various parts of India I can assure we are progressing. But we are still years behind a well connected EV manufacturing ecosystem backed by world class R&D with modernized MSMEs providing as reliable vendors and offering jobs to millions.

Till then I am your friend Soumya. Please subscribe to the Newsletter and leave your valuable comment.