Auto industry needs help to execute govt's grand EV plan

The Centre's grand design for mass production of electric vehicles can be put into action if it helps auto companies with viability funding for setting up lithium-ion battery mega factories. Private players might find it difficult to set up such huge facilities in the initial years, industry leaders have told DNA.

Finance minister Nirmala Sitaraman in her maiden Budget speech last week stressed the need for setting up massive manufacturing units with the plans to make India the hub of EVs in coming years.

Building large plants with state-of-the-art technology and sunshine industry will help attract global companies across areas like semiconductor fabrication and lithium storage batteries, said government officials.

According to Pawan Goenka, managing director at Mahindra & Mahindra, all that the finance minister talked about EVs will work only if India has huge factories, the way they are the world over. Citing the example of Foxconn, Goenka said it is like a city in itself. "So without the scale, these commodities cannot be competitive, and in fact in many of my meetings [with government and industry], I have been saying that we need to stretch beyond the current visible demand in creating capacity for some of these things."

Goenka said it is not wise to wait for the demand to pick up to create capacity. "However, it will be very difficult for a company to create capacity ahead of demand, for they do have to worry about the return on their investments and government may need to step in to provide some kind of viability gap."

The EV industry is at a nascent stage in India, said experts. It is less than 1% of the total vehicle sales but has the potential to grow over 5% in the next few years. At present, there are more than 4 lakh electric two-wheelers and a few thousand electric cars on Indian roads.

Though industry stakeholders are unaware of the government's blueprint on setting up of mega factories, successful execution of these projects will help India leverage out of the trade tensions between Washington and Beijing as a lot of intermediate goods are likely to move out of China.

To receive those goods in India, experts highlighted two aspects. First, the scale of production, something individual investors may not be able to achieve. Hence, it becomes imperative for the government to step in by creating mega factories for individual players to plug-and-play. Second, the manufacturing facilities will help ensure that Indian batteries cost less than those made in Cambodia, Vietnam, Malaysia and Thailand.

The government had in March announced a plan to set up Tesla-like battery manufacturing Giga plants in India under the National Mission on Transformative Mobility (NMTM). The 5-year plan envisages a few large-scale, export competitive integrated batteries and cell manufacturing facilities.

The Tesla Gigafactory1 is a lithium-ion cell assembly plant near Nevada which provides battery packs for EVs and stationary storage system.

"Creation of a phased manufacturing programme (PMP) valid for five years to localise production across the entire electric vehicle value chain. The scheme will be finalised by the NMTM and battery storage, and all necessary approvals will be taken," said a statement issued by the government.

However, many industry insiders are still sceptical about the big announcement, saying India is known for frequently changing its policies, thus putting foreign and domestic businesses in a spot. An executive of a Chennai-based automotive company said, "We need to take the announcement with a pinch of salt. India can miss the bus if it does not come with a sustainable policy roadmap regarding EVs."

According to a Niti Aayog report, EVs use power-electronics extensively. India had an early start of its power-electronics industry, but it has not kept pace with new developments that have seen digitisation over the last decade. India would need a new power-electronics industry which can help develop and produce high-efficiency sub-systems for EV industries.

A recent Icra report said that the EV battery, which accounts for almost one-third of the total cost, will remain a key determinant in the rate of acceptance of EVs globally. In a significant development, the cost of lithium-ion EV battery fell to almost one-fourth to $208/Kwh in 2017 from $800/kwh in 2011.