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Why China is no longer our competition in EV?


For all the brouhaha about China being our biggest competitor, a lot has happened in the last 6 months which has changed the competitive landscape for us in India across all sectors. This article is about that change especially with respect to EV. I draw heavily on a prediction I had made in a media interview way back in June of this year, when I was asked how the India EV ecosystem can gain from the 'anti- China' sentiment which was running through the globe.

A strong fervour of 'Atmanirbharta' took over our country circa April 2020.  The undermining geo-political undercurrent which flared up that sentiment in India was the strong anti-China sentiment which ran across the globe. International companies had been actively looking to diversify supply chains amid the U.S.-China trade tensions and the coronavirus pandemic. The idea behind the 'Atmanirbharta' campaign was to attract manufacturing bases away from China into India. Especially for a fledgling EV industry that made absolute business sense. The world was looking for India to be that alternative to China to become the manufacturing hub for EVs right from batteries to the rest of the ecosystem. India had it all - smart workforce, growing local demand and a compelling fervour to tame the dragon.

But what do the numbers say about the efficacy of this intent? Our government in March announced incentives for firms which have niche products and manufacturing capabilities like electronics, eligible for a payment of 4%-6% of their incremental sales over the next five years. With this incentive about 25 odd companies pledged around $1.5 billion of investments to set up mobile-phone factories in the country. The government was also planning to introduce a phased manufacturing program for other sectors to allow companies to gradually increase local value-addition. The program, currently in vogue for components and accessories used for mobile phones, was proposed to be extended for other segments, most of which were being imported from China. Electric Vehicle manufacturing would fall into this niche sector but no one turned up for that party.

According to a recent survey by Standard Chartered, this international intent to find an alternative to China has not translated into big gains for India despite the nation making it cheaper for businesses to open shop. Vietnam remains the most favored destination, followed by Cambodia, Myanmar, Bangladesh and Thailand. Reports way back in 2019 showed that Vietnam and Bangladesh were eating away into India's strategic headway and securing larger chunk of the manufacturing pie moving away from China.

In the EV sector, while there was expectation for new entrants to setup manufacturing shop in India, not much has happened since. The nail on the coffin for was the report that Tesla might be laying down plans to build a dedicated battery factory in Indonesia to take advantage of the Nickel rich geography of Indonesia. While the reports were not confirmed, the specificity of the locations - 'Batang in Central Java is being developed by Indonesia into an expansive industrial area' meant there were serious deliberations. As compared to that, we have nothing more to show than an enormous increase in sales of 'India loves Tesla' T-shirts driven by the off the cuff tweets by the great man himself.

So China is no longer competition to India. We now have other countries to fend off against. Unless there is a concerted effort to attract EV manufacturing base to India, there is fear we will have to import batteries from Indonesia and Thailand and motors from Vietnam and Bangladesh. This will be akin to loosing the match all over again, the same way we lost solar cell manufacturing to China, where we were left at best to calling "assembling the cells on a tabletop" as "value added manufacturing".