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Can India Become An Automotive Superpower?

For the last few decades we have watched as India teetered on the brink of achieving its potential of sustained high economic growth. Can India achieve this by becoming an automotive superpower? She is expected to be the third largest global automotive market by 2026 and is targeting 30% of new vehicle sales being electric by 2030.

In her 2022 budget, India is creating special mobility zones for EVs, implementing a battery swapping policy, and formalising interoperability standards for batteries. These announcements, if implemented efficiently, will push EV penetration significantly in India, especially in public transport.

The Indian government has extended tax incentives from 3 to 4 years for EV startups and is encouraging battery swapping to maximise use of space. The budget includes incentives for homegrown battery manufacturing as well. The battery industry in India suffers from a dearth of local expertise and unavailability of key raw materials, but will benefit from cheap labour and power. Cell manufacturing costs in India, as of 2020, were the lowest (US$92.8/kWh) when compared with the United States, European nations, and even China (US$98.2/kWh) and South Korea (US$98.1/kWh).

The government’s recent announcement of the Production-Linked Incentive (PLI) Advanced Chemistry Cell (ACC) scheme to encourage domestic production of cells is a step in the right direction. The scheme has attracted bids from 10 major companies, such big names as Reliance, Hyundai, L&T, Exide, and Amara Raja are already in the race to build capacity for cell manufacturing in India.

JMK Research estimates the annual capacity addition of lithium-ion batteries will increase from 2.6 GWh in FY2021 to 116 GWh by FY2030. The government wants to break reliance on imported Chinese batteries and promote the production of batteries that are able to handle India-specific conditions. An India-specific cell must withstand temperatures of ~45°C to 50°C.

Only time will tell if these measures will give India independence from her more technologically advanced neighbour and also an economic surge to fulfill her potential by becoming an automotive superpower.

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David Waterworth is a retired teacher who divides his time between looking after his grandchildren and trying to make sure they have a planet to live on. He is long on Tesla [NASDAQ:TSLA].


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