Economic Survey: Need to widen scope of EV policies to lower dependence on China

India must broaden the scope of its electric vehicle (EV) policies to adapt to growing industry needs and reduce reliance on imported components for such eco-friendly vehicles, the Economic Survey said on Friday.

It said an expected growth in demand for EVs is likely to increase dependence on imported parts such as DC motors, e-motor magnets, and other electrical parts. According to the survey, leading EV manufacturers have noted a growing share of Chinese imports in their total material expenditures. This reflects a strong dependence on China for certain resources and technical knowhow.

According to the Survey, the effects of the rise of China as a manufacturing colossus are seen in automobile manufacturing especially electric vehicles, mining and refining capacity for critical minerals such as copper, lithium, nickel, cobalt and graphite, and clean energy.

Elaborating on the scale of China's prowess in the EV sector, the Survey said India's northern neighbour has vertical integration across the entire EV supply chain, from mining to EV manufacturing. This has enabled it to retain its global dominance in this sector. "About 70% of the world's rare earth minerals, which are critical resources for high-storage batteries, are processed by Chinese companies," the Survey pointed out.

China's rise in the global automobile market has disrupted long-term incumbents in economies like Germany and Japan, with the country dominating the global distribution of critical minerals and other economic resources, creating potential dependencies for posterity.

Detailing the significance of critical minerals for EVs, the Survey said, "Manufacturing an EV, relative to a conventional car, requires nearly six times more minerals to produce, most of which are utilised in producing the EV battery."

"This is an important consideration as many minerals crucial to EV manufacturing are scarcely available or processed in India while simultaneously being concentrated in very few countries," it said.

Going forward, the Survey stressed upon having EV policies that focus on de-risking supply chains by promoting a more self-reliant ecosystem. This should be powered by increased research and development (R&D) in advanced battery technologies such as sodium-ion and solid-state batteries.

"Securing intellectual property in this domain can prove invaluable...facilitating investment in battery recycling infrastructure can yield greater long-term gains for the Indian automotive sector," the Survey said. Separately, Production Linked Incentive (PLI) schemes can stimulate manufacturing of lithium-ion cells for EVs in the interim, as bulk of the production and value addition takes place till the cell-making stage, it added.

Besides, tax breaks on EVs and subsidies on using renewable energy can motivate people to switch to low-carbon lifestyles, the Survey said. "Financial incentives, such as tax breaks for electric vehicles and renewable energy use subsidies, can motivate individuals and organisations to adopt greener practices," it added.