Rise of Electric Vehicle Industry in India
Since the invention of the Internal Combustion Engine in 1872 by American George Bryant, despite significant improvements, the technology has more or less remained the same for the last century and a half. The dependence on ‘liquid gold’ has been so extreme, that for over a century, we used the same product. For the first time the automobile Industry is changing – as we realize, we cannot forever be reliant on petrol.
“All things that live die, no matter how long it takes.”
Hockey moved from Grass to Astroturf. Tennis moved from Wooden to Titanium Rackets; the list goes on and now Automobiles are moving from Oil to Electric. Global demand for lithium is estimated to grow by more than 4000 percent by 2040 in a scenario where the world achieves its climate goals.
At the outset we should state that for India to excel in the EV Industry like it did with oil driven automobiles would be a moon-shot to be kind. There are wide arrays of hindrances to the goal of changing the entire fleet of new cars from petrol to EV. India’s continuous problems with China impose one of the greatest limitations which we will outline going forward.
It would require a whole infrastructure of charging stations across the country for it to work, which in an emerging nation like India is a challenge on its own; add to that the vast geography of the country and it’s a nightmare of a job logistically. Secondly, India has no existing supply chain as it does for the traditional automobiles, with component manufacturers situated close the OEMs (Original Equipment Manufacturers; Ex: Maruti, Bajaj Auto etc.)
Lithium batteries are an essential element of the EV market, accounting for up to half of the consumer cost of an EV. China refines 60 percent of the world’s lithium and 80 percent of the world’s cobalt, two core inputs to high-capacity batteries - which present a critical vulnerability to the future of the domestic auto industry in India.
Having seen the Steel Industry in the US scale down significantly since the 1970’s due to other geographies across the world taking up its fair share, India’s Auto Industry needs to wake up to the dynamic shift happening in the Industry before the game is over. The Government has to provide the biggest push in terms of helping create and maintain an ecosystem wherein areas from R&D to efficient, uninterrupted supply chains are maintained.
United States Department of Commerce warns, “ultimately, volume drives both innovation and operational learning; in the absence of the commercial volume, the United States will not be able to keep up with the technology, in terms of quality, cost, or workforce.” The same applies for India in terms of creating and maintaining stable supply chains.
There are some startups in India like the Ratan Tata backed Tork Motors which is expected to bring its first electric 2-Wheeler to the markets in addition to Okinawa and BattRe which have already started production and others like Revolt are supposed to come out with electric vehicles soon. Other established players like MG, Tata Motors and Hyundai have started production already.
The vast success and exorbitant valuations of global EV manufacturers – For instance Tesla’s valuation is already close to 700 billion, over 8x of GM which manufactures loads more cars than Tesla. Extremely attractive valuations of other global players like Nikolo, BYD, Fisker etc. should push Indian players to enter the market, but the journey is uphill and impossible without large scale government intervention.