What Are The Major Challenges And Solutions In EV Supply Chain Management?

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Opinion piece by Nishant Saini – Founder and Managing Director, eee-Taxi

The Indian EV market has seen a lot of thrust in the recent past. The market is slowly moving towards maturity with emergence of new players in electric 2 wheeler and electric three wheeler production, electric four wheeler, Battery pack manufacturers, EV fleet operators, EV Charge Point Operators and IOT operators.

The Indian automobiles market appetite for EVs is growing, however the pertinent question remains about the reliability of EV supply chain. The mismatch between demand and supply could undo the market sentiments and consumer confidence.

Schemes like Atma Nirbhar Bharata and Make In India push for localisation of the supply chain which could allow the EV Industry to cut over reliance on imports.

The entire EV components can be grouped into 5 – 6 categories : Battery Cells, Chassis & Body, Motor, BMS, Power Electronics etc. Battery Cells, Motor & Power Electronics alone contribute to close to 50% of the total EV cost. It is a grim reality that the above mentioned components have the lowest level of localisation. Whether it is an electric 2 wheeler market or 3 wheeler market, batteries remain the most important component of Supply chain management.

The unavailability of Lithium, poor R&D and technology intervention, unavailability of rare earth magnets for motors, Power electronics etc are some of the major issues plaguing the EV supply chain.

Policy makers, both at Central & State level have made sincere attempts to these challenges. Indian Government has created momentum for EVs through its INR 10K Cr FAME Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles Scheme. The FAME II scheme was tweaked in favor of localisation and restrictions were placed to avail subsidies like at least 40% localisation for buses and 50% of other vehicles.

Additionally, import duties on Completely Built Units (CBUs), Semi Knocked Downs (SKDs), and Completely Knocked Downs (CKDs) were increased by 5% to 25% w.e.f. April 2020. On the other hand, duties on Li-ion cells and battery packs are set to increase from 5% currently to 10% and 15%.

Hence, it would be prudent if Indian EV Supply chain ecosystem takes measures like robust investment in Battery R&D. Organisations like ISRO & DRDO have lately been doing amazing research works at their labs. Existing & New OEMs should also pledge to procure locally made material and support the ancillary sector in providing necessary support. And lastly, we need to move towards a lower tax regime while promoting localisation, The current rate of import duties on cells and other components are high (as high as 40% on CBU, 40% on lithium ion batteries) . While it is not practically possible to ramp up production in the immediate future, we may follow import substitution policy. The lower tax duty along with Technology Transfer will provide the necessary breather to the budding EV sector. In the long run, once the EV supply chain starts graduating towards maturity, import curbs may be placed to protect the domestic industry.

Today, there is a need to follow a calibrated approach to fix supply chain issues in Indian market with support of all stakeholders.

By Nishant Saini- Founder and Managing Director, eee-Taxi

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