<< back
ReachX logo

Electric Vehicle Start-ups: A missed opportunity for India

Publication Date: 11 May 2018 - By Market Mogul By Market M.

Environmental, Social & Governance Macro Multi Asset Asia ex-China


Tesla Motors has revolutionised the automotive industry, and OEMs must face up to the challenge Elon Musk has set down in the development of electric vehicles (EVs). Before Karl Benz perfected the internal combustion engine and brought fossil fuel powered cars to market, vehicles were already running on batteries.

Thus, the concept of EV is not new and has not just become a reality today. However, EVs were abandoned early on in favour of petrol powered motor vehicles.

Chevrolet again introduced the concept of using electric cars in the 1980s. Now, many EV startups are popping up all around the world, challenging the established car manufacturers. This challenge has forced the automakers to venture into EVs.

The major component of electric vehicles is its battery, built with lithium, the lightest metal on the periodic table. The production of lithium is the main bottleneck for the automotive industry because existing lithium production also needs to satisfy the massive consumer electronics industry as well. Thus, this light metal is considered to be one of the most important resources for the 21st century, akin to oil in the 20th.

Except for the IT industry, India was a late entrant to the new breakthrough technology sectors. But this time instead of being merely late to the party, it seems India has declined the invitation altogether. Thus, India lost a golden opportunity to develop a battery manufacturing industry which would power the future, especially in a world facing climate change.

Tesla Motors scouted for possible locations for a new plant outside the US. China and India were the finalists, and China got the final nod for the proposed plant. India could not take advantage of this fantastic opportunity that could have developed its automobile industry. The government of India recently stated that the country will not have an EV policy but will have “action plans”. The whole Indian auto industry is stunned by this decision. It has created a lot of ambiguity among manufacturers.

A proper policy on EVs could have formed an integral part of the government’s much talked about Make in India and Start up India initiatives. But the current government focused on existing industries rather than exploring new avenues for the manufacturing sector. India’s decision makers have shown a lack of foresight.

While domestic automakers, like Tata or Mahindra, are trying to bring EVs to market, they show a lack of vision in another respect. They have demonstrated very little interest in the race for lithium. They could have manufactured batteries in India rather than sourcing them from neighboring country.

Chinese Vision

This lack of foresight and enthusiasm of both Indian government and automakers have created an opportunity for its arch-rival China. India does not have any lithium deposits, but China, while not exploiting its deposits, still wants to be the leader in curbing the air pollution and also keen on acquiring the state of art of electric vehicle manufacturing. To do this, Chinese firms are bringing supply chains under their control. Chinese firms are acquiring holdings in lithium mining and manufacturing firms of leading lithium producing countries.

Last September, Chinese automaker Great Wall Motor acquired stakes in Pilbara Minerals, an Australian lithium miner. In early 2017, China’s Ganfeng Lithium snapped up 20% of an Argentine project. In 2016, China’s Tianqi Lithium took a 2% stake in Chile’s SQM, one of the world’s top miners of the metal. Chinese automakers are introducing EV’s in their domestic market and have also started establishing recharging stations all around China.

Recently, Chinese automaker BYD has started setting up charging stations just like Tesla Motors is doing in the US. If this continues, then most of the automakers will be forced to establish EV manufacturing plants or else will have to depend on monopolistic Chinese battery manufacturers.

China is developing their battery manufacturing infrastructure faster than anyone in the world, including the US. Unless the situation changes, the world will have to depend on China for the production of lithium batteries. An excellent opportunity for the Indian manufacturing sector to challenge the Chinese firms as well as to other Asian tigers was missed. In the future, China will dictate the terms and conditions in trade agreements which will shift the power from West to East. There are already signs of it happening.

This post appeared first on The Market Mogul.


Most read