EV Policy Needs To De-Risk Supply Chain, Eco Survey Flags Rising Import From China

January 31, 2025

India’s policies for electric vehicles must focus on de-risking supply chains by promoting a more self-reliant ecosystem, the Economic Survey

India’s policies for electric vehicles must focus on de-risking supply chains by promoting a more self-reliant ecosystem, the Economic Survey 2024-25 said on Friday highlighting China’s global dominance over key components and raw materials in the sector. The pre-budget document also asserted that India must aim to establish technology transfer agreements with other nations that are also seeking to diversify their supply chains and forge partnerships with other aspiring nations to help distribute the high costs of securing a comparative advantage in the global market.

While India has made impressive strides in promoting domestic manufacture of electric vehicles (EVs), to sustain the growth momentum, there are some important considerations to keep in mind, it pointed out, citing an example of the requirement of six times more minerals to produce an EV as compared to a conventional car.

“Going forward, policies for electric vehicles must focus on de-risking supply chains by promoting a more self-reliant ecosystem powered by increased R&D in advanced battery technologies, such as sodium-ion and solid-state batteries,” it asserted.

The survey further said, “Securing intellectual property in this domain can prove invaluable. Additionally, facilitating investment in battery recycling infrastructure can yield greater long-term gains for the Indian automotive sector.” 

Stressing on the need to de-risk the EV supply chain, the survey said many minerals crucial to EV manufacturing are scarcely available or processed in India while simultaneously being concentrated in very few countries.

Ministry of Mines has analysed the 33 critical minerals vital to India’s economic security and found that 24 are currently at high risk of supply disruptions, it noted.

“China commands a significant share of critical mineral processing and production globally. Across key commodities such as Nickel, Cobalt, and Lithium, China alone is responsible for processing 65 per cent, 68 per cent and 60 per cent of the global output, respectively,” the survey pointed out.

Similarly, in the case of rare earth minerals, China contributes to 63 per cent of global mining and 90 per cent of global processing output, it added.

“Moreover, lithium-ion batteries will dominate other technologies for quite some time, and their demand is expected to grow at a CAGR of 23 per cent by 2030. The lack of viable alternative battery technologies reinforces China’s dominant position in Lithium-ion batteries,” the survey noted.

The survey said while India has laid good foundations through initiatives such as promotion of domestic manufacturing facilitated by schemes such as FAME India, the PLI Scheme for Auto Components, and the Scheme for Promotion of Manufacturing of Electric Passenger Cars in India, future policies will have to broaden their scope of coverage in a manner that adapts to the growing needs of the EV industry.

“As demand for EVs is expected to grow, dependence on imported components such as DC motors, e-motor magnets, and other electrical parts will likely rise. Leading EV manufacturers have noted an increasing proportion of Chinese imports in their total material expenditures, reflecting a significant dependence on China for certain resources and technical knowhow,” it said.

Initiatives such as the PLI Scheme for Advanced Chemistry Cell Manufacturing and the setting up of Khanij Bidesh India Ltd (KABIL) have been undertaken to deal with such risks, it noted.

Suggesting measures for the interim, the survey said, “PLI Schemes can also reward the making of EV cells (Lithium-ion cells), as most manufacturing and value addition happens up to the cell-making stage.” 

Furthermore, it said, “India must aim to establish technology transfer agreements with other nations that are also seeking to diversify their supply chains. Partnerships with other aspiring nations can help distribute the high costs of securing a comparative advantage in the global market.” 

The survey noted that electric mobility is an important element in India’s path to Net Zero and the country has made impressive strides in promoting domestic manufacture of EVs.

“However, to sustain the growth momentum, there are some important considerations to keep in mind. For instance, manufacturing an Electric Vehicle, relative to a conventional car, requires nearly 6 times more minerals to produce, most of which are utilised in producing EV battery,” it said.

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