Natural growth of EV sector must be allowed to prevent India from becoming China’s ‘EV colony’: GTRI

Representational file image. | Photo credit: Sudhakar Jain

The government should allow the domestic electric vehicle sector to grow naturally without relying on incentives as this will prevent India from becoming an ‘EV colony’ for China, think tank GTRI said on Friday (September 6, 2024).

It said that India is facing challenges in adopting EVs (electric vehicles) on a large scale, which other countries are not facing.

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These challenges include 80% of electricity produced from fossil fuels such as coal, frequent power cuts and the country’s reliance on imports such as batteries and critical minerals needed to make electric vehicles, the Global Trade Research Initiative (GTRI) said.

“Considering these challenges, rather than rushing into the fray with heavy incentives or relying on Chinese imports, India has an opportunity to let its EV sector develop naturally. By allowing market forces to drive the growth of the sector, India can avoid becoming an ‘EV colony’ for China and make its own way in the global EV landscape,” it added.

It also said that the global EV market is undergoing a major transformation, due to the imposition of high tariffs and restrictions on imports of EVs and components from China by the US, the European Union and Canada.

These regions make up nearly half of China’s global EV exports and in a strategic turn, China is shifting its production to ASEAN countries and setting its eyes on India.

“These manufacturing units will still be heavily dependent on imports from China as 70-80 per cent of components, including batteries, come from China. Thailand, the first country to allow local production by Chinese companies, is already facing challenges due to rising imports and complaints of low sales from established manufacturers,” said Ajay Srivastava, founder of GTRI.

There is also a risk that China could add additional electric vehicles to India, as access to developed markets becomes harder, he said.

GTRI suggested that India should focus on gaining leadership in the next phase of electric vehicles using new generation batteries.

Increasing investments in research and development (R&D) for advanced battery technologies, battery recycling infrastructure and supporting clean energy sources to power EV charging stations are some of the steps that will help boost growth of the sector, it said.

Deep Kapuria, Chairman, Hi-Tech Gears, said the global EV market is set to witness further disruption and structural change as the sector is witnessing several trends that are driving its growth.

Kapuria said, “Firstly, many countries (developed and developing) are offering subsidies, tax benefits and other incentives to encourage consumers to switch to electric cars. Secondly, macroeconomic factors such as the availability of critical minerals such as lithium, cobalt and nickel required for battery production can positively impact the growth of the EV industry.”