India’s push for EVs may lead to large-scale entry of Chinese firms in domestic mkt: GTRI

The Indian government's initiative to bolster domestic electric vehicle (EV) manufacturing could pave the way for significant involvement of Chinese automotive companies in the local market, according to Global Trade Research Initiative (GTRI). 

GTRI highlights China's robust automotive industry, driven by substantial governmental backing, particularly in electric vehicle technology. This has positioned China as a prominent exporter of EVs and associated components.

With India aiming to establish itself as a hub for e-vehicle production, coupled with contributions from the private sector, there's anticipated to be a notable surge in reliance on auto component imports from China, the report suggests.

In the fiscal year 2022-23, India's auto component imports totaled $20.3 billion, with China accounting for 30 percent of this figure. As electric vehicles gain prominence in India, the report foresees a further escalation in imports from China, given its significant influence over the global supply chain for EV components.

Estimates suggest that China currently holds 75% of the global battery production capacity, a significant factor as batteries constitute 40% of an electric vehicle's cost. Moreover, China dominates over 50% of the worldwide production and export of electric vehicles (EVs).

According to a report, in the near future, approximately one-third of electric vehicles on Indian roads could originate from Chinese manufacturers, either independently or through joint ventures with Indian counterparts. Ajay Srivastava, founder of GTRI, highlighted that entering the Indian market offers a crucial opportunity for Chinese firms, providing them with much-needed relief.

"China's EV exports to the European Union and the United States are declining due to anti-subsidy probes and increased trade restrictions over the export of subsidised cars/EV batteries," he said.

Estimates suggest that China currently holds 75% of the global battery production capacity, a significant factor as batteries constitute 40% of an electric vehicle's cost. Moreover, China dominates over 50% of the worldwide production and export of electric vehicles (EVs).

According to a report, in the near future, approximately one-third of electric vehicles on Indian roads could originate from Chinese manufacturers, either independently or through joint ventures with Indian counterparts. Ajay Srivastava, founder of GTRI, highlighted that entering the Indian market offers a crucial opportunity for Chinese firms, providing them with much-needed relief.

"Other Chinese companies, including Changan Automobile, Jinko Solar, and several bus and truck manufacturers like Zhongtong Bus and Foton Motor, also contribute to China's automotive presence in India," Srivastava said, adding that Great Wall Motors and Haima Automobile are also looking to enter the Indian market, indicating an increasing Chinese influence in India's automotive sector.

He stated that with considerable state backing, China's automotive sector has swiftly progressed in electric vehicle technology, establishing itself as a prominent exporter of EVs and associated components.

According to the report, India's automobile industry now contributes 7.1 percent to the nation's GDP, a significant rise from 2.8 percent in 1992-93. It offers direct and indirect employment opportunities to over 19 million people.

"The large-scale entry and market dominance of Chinese automakers in India will impact the domestic auto/EV manufacturers, firms working in EV value chain space, and battery development," the report said, adding currently, nearly a quarter of India's auto component imports come from China.

It was observed that the reliance on China will significantly escalate with the growing presence of Chinese car manufacturers in India, who are likely to import the majority of their parts and components from China.

"China has firm plans to increase its presence in India in the passenger vehicle and commercial vehicle segments, after flooding the market with e-rickshaws and two-wheelers," it added.

The report indicated that both the government and industry stakeholders must prudently handle the risks associated with excessive dependence on foreign manufacturers and potential trade imbalances.

"India's decision to allow Chinese car makers in India and cutting import tariffs on electric vehicles (EVs) will benefit Chinese manufacturers directly or indirectly being the dominant suppliers of EV batteries. Supply chain dependence on China will sharply increase even when non-Chinese companies (Tesla, Vinfast) set shop in India," Srivastava said.

India's latest announcement unveils a new Electric Vehicle (EV) policy, slashing import duties on four-wheeled electric vehicles from 70-100% down to just 15%. This reduction will be granted to foreign companies investing a minimum of USD 500 million in the country's burgeoning EV sector.

(With inputs from PTI)