Indian EV Drive Sparks Grown Up In Chinese Auto Firms: GTRI Report

India's ambitious push towards bolstering domestic electric vehicle (EV) manufacturing may pave the way for a substantial influx of Chinese auto firms into the local market, suggests a report by the Global Trade Research Initiative (GTRI).

Citing China's burgeoning automotive industry, propelled by extensive state support and rapid advancements in electric vehicle technology, GTRI underscores the potential for Chinese manufacturers to establish a significant presence in India's evolving EV landscape.

With India's renewed focus on positioning itself as a hub for EV manufacturing, coupled with private sector initiatives, there's a projected surge in reliance on auto component imports from China. In 2022-23 alone, India imported auto components worth USD 20.3 billion, with 30 percent originating from China. This dependency is expected to escalate further as EVs gain traction, given China's stronghold over the global supply chain of EV components, particularly batteries.

According to estimates, China currently commands 75 percent of the world's battery production capacity, with batteries constituting a significant portion (40 percent) of an EV's cost. Moreover, China's dominance extends beyond manufacturing, with over 50 percent of global EV production and exports emanating from the country.

GTRI's founder, Ajay Srivastava, emphasises that Indian market entry provides a respite for Chinese firms amid declining exports to the European Union and the United States due to increased trade restrictions and anti-subsidy probes.

A joint venture between SAIC in China and JSW Group in India, JSW MG Motor India serves as an example of this trend. It has announced a significant investment of Rs 5,000 crore to increase production capacity and regularly introduce new models beginning in September. Comparably, the largest manufacturer in China, SAIC Motor, and the JSW Group established a joint venture agreement in November with the goal of advancing the expansion of MG Motor in India and reaching a million passenger electric vehicle sales by 2030.

Beyond SAIC Motors, other Chinese auto giants like BYD Auto have made significant inroads into India's EV market, offering a diverse range of electric vehicles, including buses, trucks, cars, and SUVs. This growing Chinese influence extends to various sectors, with companies like Changan Automobile, Jinko Solar, Zhongtong Bus, Foton Motor, Great Wall Motors, and Haima Automobile eyeing entry into the Indian market.

The burgeoning partnership between Indian and Chinese firms, however, raises concerns about over-reliance on foreign manufacturers and potential trade imbalances. With nearly a quarter of India's auto component imports originating from China, there's a looming risk of heightened dependence, particularly as Chinese firms may predominantly source parts and components from their home country.

While India's recent decision to slash import duties on electric vehicles aims to attract foreign investment, there are apprehensions regarding the dominance of Chinese manufacturers, especially in critical segments like EV batteries. This underscores the importance of adopting strategic measures to mitigate risks and ensure a balanced ecosystem.

India's pursuit of becoming a global player in the EV market presents both opportunities and challenges, particularly with the increasing influence of Chinese manufacturers. By fostering indigenous manufacturing capabilities, promoting collaborations, and implementing robust regulatory frameworks, India can navigate this transformative phase while maximising its potential as a leader in sustainable mobility.

PTI Inputs