Falling short: on India's EV journey
On June 2, India took a turn for the better in its transport electrification journey by offering a concessional import duty of 15% on completely built-up units. This is contingent on the EV manufacturer investing a minimum of about ₹4,150 crore over three years to localise manufacturing in India, with a base domestic value add of 25% in three years, going up to 50% in another two years. The notification, under the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) announced in March 2024, allows for a maximum import of 8,000 completely built units annually for each manufacturer for five years. The SPMEPCI adds to the bouquet of policies that attempts to boost EV adoption and manufacturing. However, these policies put together fall short of addressing a pressing issue in India's journey to decarbonise and transform mobility — technology transfer. India began this journey in 2015, about five years later than most large economies. An outlay of ₹895 crore for the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME) scheme, for five years, expanded to ₹10,000 crore in 2019. China announced its ambitious New Energy Vehicle subsidy programme in 2009, which, coupled with mandatory joint venture manufacturing of EVs until 2022, enabled technology transfer. In addition, a reduced import duty on EVs (25% in 2010 to 15% in 2018), and cumulative incentives of about $230 billion in the past 15 years — the most by any country — enabled China to achieve the highest global EV adoption rate. This also supported rapid charging infrastructure deployment, making China the largest producer and consumer of EVs.
The U.S. began this journey in 2010 with an initial outlay of $25 billion for its Advanced Technology Vehicles Manufacturing Loans Program. This was greatly expanded under the Biden administration's Inflation Reduction Act. But its EV adoption rate is much lower than China's. In 2024, out of 17 million global EV car sales, China alone accounted for 11.3 million, followed by Europe with 3.2 million, the U.S. with another 1.5 million, and the rest of the world accounting for the remainder. China's vertical integration of battery manufacturing, from mining, processing to assembling, has aided economies of scale with competitive pricing of EVs against conventional ICE vehicles. For now, the 25% DVA that India could aim for under the just announced scheme would be repurposing locally made auto components meant for ICE vehicles to EVs and layering it with Software-as-a-service. But to obtain the crucial technology for the heart of the EV — its battery — India must replicate its approach to localising ICE manufacturing, which is to mandate joint ventures with local ICE or EV makers, and gradually allow for a complete open market.
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