New Electric Vehicle Policy In India: Key Highlights

Context

Government’s new electric vehicle policy seen as a major incentive for the sector.

China’s Rise in the EV Market

• In 2023, China’s BYD became the largest EV seller, selling 3.2 million cars in a year.
• The threat of low-cost Chinese EVs entering the Indian market increased.
• The Indian PM and Elon Musk met in the US, and Tesla agreed to set up a plant in India.
• Tesla demanded relaxation in import duties, which the government finally agreed to in its new electric vehicle policy.

New Electric Vehicle Policy In India

• New Electric Vehicle Policy focuses on making India a global EV hub.
• It offers concessions to attract global EV companies to invest in India.
• Companies investing ₹4,150 crore, starting a plant within 3 years with 30% domestic components, get 15% import duty on cars priced above $35,000.
  • Benefits Tesla, allowing them to test the Indian market potential before setting up a plant.
  • Domestic companies like Tata and Mahindra not affected as their cars are in the $20-25k range.
• Chinese companies are excluded as their cars are below $25k.

China’s Dominance in EV Batteries

• Lithium Batteries: Lithium batteries are the most critical component in EVs, accounting for 40% of the cost.
• Two largest lithium battery companies, producing over 55% of the world’s batteries, are from China.
• China stakes in over 20 lithium mines worldwide, despite mining only 8% of the world’s lithium.
• Australia, the largest lithium producer, exports mostly to China due to China’s refining technology.
• China’s dominance comes from its monopoly on rare earth minerals used in EV batteries (lithium and cobalt).

China’s EV Subsidies and Security Concerns

• High Subsidy: China provides significant subsidies, amounting to $57 billion, to electric vehicle (EV) companies.
• Security Concerns: China’s dominance in the EV sector raises concerns about its impact on the economies and security of other countries.
  • Security concerns emerge from allegations of Chinese companies spying and sending data to China.

India’s Challenges

• Import Dependence: India is 100% dependent on lithium imports, mostly from China.
• Lack of Charging Facilities: Range anxiety persists due to lack of charging facilities (1 station per 199 cars in India vs. 1 per 23 cars in the US).
• Competition: Chinese-owned companies like MG already selling EVs in India.

India’s Advantages 

• Successful Adoption of EVs: India leads in 2-wheeler and 3-wheeler EVs, which can be replicated in the car sector. 
  • India’s advanced software capabilities contribute to the success of 2-wheeler EVS.
• Diversification of Import: India signed agreements for 5 lithium mines in Argentina.
• Leveraging Domestic Production of Critical Minerals: 
  • Large lithium reserve discovered in Jammu and Kashmir.
  • Sodium-ion battery production has begun in India, challenging China’s EV battery dominance.
• Policy Push: PLI scheme and FAME scheme have created an ecosystem for EV cars in India.

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