Future Outlook For Indian Electric Vehicle Supply Chain

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Co-authored opinion piece by:

Preetesh Singh – Manager, Nomura Research Institute Consulting and Solutions India Pvt ltd

&

Shravan Banoth – Deputy Senior Consultant, Nomura Research Institute Consulting and Solutions India Pvt ltd

Indian policy makers have always prioritized the importance of localization of EV supply chain in the process of EV adoption in India. The idea of localization is in place since the beginning of the EV journey when National Electric Mobility Mission 2020 has been formulated. xEV one program under FAME-I was the first step towards achieving standardization and economies of scale for critical components. The initiative was not successful as OEMs were risk averse towards the change from conventional IC engines. However, the xEV one program has set the direction for the Government and OEMs to understand the importance of localization of EV supply chain for a sustainable EV adoption in the future.

All such initiatives helped Indian manufacturers to actively participate in strengthening the local supply chain for EV in India. The current level of localization for critical parts of a small car electric vehicle is still very low. However, the level of localization year on year is observed to be increasing. Current net localization of critical components like LFP Battery stands at ~20% with packs being assembled in India. For power and control wiring harness along with connectors, the localization levels are at ~45% and  ~15% for low voltage and high voltage respectively. The type 2 AC charging inlets and other power electronics components like electric safety devices, MCB, circuit breakers achieved a good localization percentage of ~35% with child part manufacturing, system assembly and testing done in India. The level of localization for other critical components like vehicle control units, on board charger and electric compressor are as low as ~5% with high dependency on imports. For traction motors and controllers, the current level is at ~10% as the domestic supplies have a low power capability. The complete hardware for DC-DC convertor is being imported with only ~10% of local value addition for testing and integration support. 

The Government is driving the industry for EV adoption primarily through the following three schemes:

  1. FAME-II Localization Criteria to develop assembly level capability: The current focus is to strengthen the Tier-1 in India offering a slight flexibility on net localization levels. Net localization might improve as industry progresses and achieves the large volume in future. Government has been supportive to the manufacturers by shifting the timeline as required considering the challenges faced by stakeholders in localization.   
  2. PMP Scheme to Increase the local content in the component assembly listed under FAME-II Localization Criteria: Under PMP, the Government charged 0% duty for child parts till 2021. However, the import duty on child parts is directed to a hike of 15% to push the local manufacturing of AC or DC Charger, AC or DC Motor, AC or DC Motor Controller, Power Control Unit, Energy Monitor, Contactor, Brake System for recovering, Electric Compressors
  3. Production Linked Incentive (PLI) Schemes: On November 11, Government announced a production linked incentive of ~INR 1.5 Lakh Crore to boost local manufacturing in sectors like Automotive, Battery etc. with the focus on developing capabilities across all tiers (1,2&3) of suppliers. For Battery Makers, Cash subsidies will be provided depending on Local Value Addition percentage and the Scale of Production (GWh.).

Thus, the big plan of EV adoption can be executed better with prime focus on localization of EV supply chain. The role of Government initiatives by anchoring such transformation by setting up the direction and motivation to automotive OEMs and suppliers would be the most critical step for sustainable EV adoption in India. 

Co-authored by Preetesh Singh – Manager, Nomura Research Institute Consulting and Solutions India Pvt ltd

&

Shravan Banoth – Deputy Senior Consultant, Nomura Research Institute Consulting and Solutions India Pvt ltd

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