India’s journey towards an electric vehicle (EV) future is both rapid and commendable. The Union government set ambitious goals and offered incentives for EV manufacturers. Multiple state governments also came up with incentives to make EVs more affordable. A large number of start-ups today crowd the electric two-wheelers sector. Established giants of internal combustion engine (ICE) two-wheelers are introducing their models. Domestic auto players -- Tata Motors and Mahindra -- got into EVs offering a robust range to customers long before their global counterparts entered the country with their offers.
However, India’s EV growth is also suffering from the same haphazard policy and planning issues that created growth hurdles in many manufacturing sectors. The issues include a late start in securing critical metals needed for batteries that will be crucial to the growth of the EV sector, a lack of proper quality standards and monitoring, and finally a lack of planning for the disposal and recycling of EVs -- especially EV batteries when they reach the end of their lives.
Though the government as well as multiple entrepreneurs talk about plans for EV battery manufacturing in India, the truth is that most of the EV batteries sold in India are made in assembly operations, importing nearly everything from China and then putting their labels on the finished product. This is because China dominates both lithium and cobalt processing and battery manufacturing. Nickel, the third metal needed for EV batteries, is not quite in such short supply as the other two but its prices are also affected by any disruption.
While China also has reserves of all these three metals, their position at the top of the global EV battery supply pecking order has more to do with their processing capacities and their mining rights in other countries than the number of mines they have within their borders. The Lithium Triangle in Latin America – Chile, Bolivia and Argentina – has the world’s largest currently known reserves of the metal. The Democratic Republic of Congo, meanwhile, is the largest source of cobalt at present, supplying over two-thirds of the world’s total output.
China and the developed countries led by the US are jockeying for control of the world’s richest lithium and cobalt mines, spending substantial amounts of money lobbying with governments owning these companies. Chinese and US mining companies already have significant mining concessions in mineral-rich countries. Unless alternate battery chemistry breakthroughs happen, it is very likely that China, the US and EU countries will significantly control the supply chain for minerals required for EV batteries.
India, meanwhile, has moved quite slowly to secure its own interest. When the jostling for mines that would play a key role in the EV revolution began a few years ago, India had a good chance to get into the game quickly but took time to figure out what is happening. It set up the Khanij Bidesh India Ltd (KABIL), which is working with governments in Australia, Chile, Bolivia and Argentina for lithium and cobalt supplies, but players from China and the US are also in the fray. They also have deeper pockets. In the case of cobalt, China took a big lead in the Democratic Republic of Congo, and Chinese-owned- and-financed companies dominate the mining of cobalt, nudging out even the US companies.
In lithium’s case, Australia remains the biggest producer of the mineral (though it does not have the largest reserves) and the US and EU countries are in a better state in the Great Game. India, in all probability, will have to settle for a marginal role and depend on others for its own supplies.
This is not the only issue in the Indian EV journey. The spate of battery fires in EV two-wheelers once again highlights poor quality control and monitoring at both the corporate as well as government levels. The government took note of these shortcomings and is beginning to look at the quality control measures of the players. But it needs to move faster and set stringent quality standards and ensure that these are met by the manufacturers. India has a real chance to dominate the two-wheeler EV segment in the world but it cannot afford to develop a reputation for being a country where quality control is lax.
Finally, there is the third issue that the Indian policy-makers need to work on immediately – the disposal and recycling of end-of-life EV products. This is particularly important for two reasons. One, in a decade or so, the number of EV batteries that will need to be disposed of will become significant. Two, a proper recycling policy and its implementation can actually help India reduce its dependence on raw materials from abroad.
The EU already passed a regulation that sets targets for progressively increasing the proportion of recycled materials in the manufacture of batteries every five years. The objective is to reduce dependency on imports and ensure that their industry is sustainable. That is what India needs as well. But for that to materialise, policy-makers need to take a long-term view. The question is whether they are methodically planning for the future.
Senior business journalist