Economic Survey flags India's EV import dependency, bats for urgent localisation

Trump's move to revoke mandates on EVs was seen stemming from concerns about increasing reliance on China for critical minerals like lithium and cobalt needed for making EV batteries.

Like US, India too depends heavily on Beijing for critical components required for production of EVs.

However, Nageswaran's Survey did acknowledge that India has to chart its own path to energy transition and diversification away from fossil fuels, making electric mobility a logical option for a country which imports most of its oil and has abundant renewable energy and coal.

"Finally and importantly, given India’s vast size and limited land availability, public transportation is a more efficient alternative for viable energy transition. Therefore, national-level policies and local nudges must promote and facilitate its use, going beyond the focus on tail-pipe emissions of private transportation choices," the Survey pointed out.

The China factor

Earlier, Global Trade Research Initiative (GTRI) had in a note said that the US's move to revoke the mandate around EVs may be linked to concerns on increasing reliance on China for critical minerals like lithium and cobalt needed for making EV batteries. India too faces similar risks, and therefore should reconsider its EV subsidies, which could unintentionally benefit Chinese manufacturers dominating the supply chain.

"Instead, India should prioritise research and development in next-generation battery technologies that minimise dependence on scarce minerals, positioning itself as a global leader in EV innovation," GTRI had said.

Nageswaran's Survey too flagged that one can see the effects of the rise of China as a manufacturing colossus in automobile (especially electric vehicles) manufacturing, mining and refining capacity for critical minerals (Copper, Lithium, Nickel, Cobalt, Graphite, etc.) and in clean energy equipment.

The Survey noted that relative to a conventional car, EVs require nearly 6 times
more minerals for production, most of which are utilised in producing its battery. And, many such minerals crucial to its manufacturing are scarcely available or processed in India, while simultaneously being concentrated in very few countries.

As per an analysis by the Ministry of Mines, that out of the 33 critical minerals vital to India’s economic security, 24 are currently at high risk of supply disruptions.

China commands a significant share of critical mineral processing and production globally.

Across key commodities such as Nickel, Cobalt, and Lithium, China alone is responsible
for processing 65 percent, 68 percent and 60 per cent of the global output, respectively, while in the case of Rare Earth Minerals, it contributes to 63 percent of world mining and 90 percent of global processing output.

Beijing also enjoys a dominant position in Lithium-ion batteries.

The Survey pointed out that as demand for EVs is expected to grow, dependence on imported components such as DC motors, e-motor magnets, and other electrical parts will likely rise.

"Leading EV manufacturers have noted an increasing proportion of Chinese imports in their total material expenditures, reflecting a significant dependence on China for certain resources and technical knowhow," the Survey noted.

Not too long ago, India unveiled an EV policy providing import duty concessions to companies that commit to invest at least $500 million, or a little over Rs 4,150 crore, and set up manufacturing units in the country in three years with at least 25 percent of components sourced locally.

This was seen by many as an attempt to woo foreign EV makers to make in India, especially US-based Tesla Inc.

Apart from that, India has also incentivised EV adoption through a production-linked incentive (PLI) scheme to make advanced chemistry cells, automobiles, and automobile components, and by lowering GST on such vehicles to 5 percent from 12 percent.