The Aryavarth Express
Agency (New Delhi): At a time when the countries such as the United States, Japan and South Korea are going slow on electric vehicles (EVs) for various reasons, it is difficult to understand why India is going gaga over its utility, substantially raising the EV production and sales targets in the next five years. India does not even produce the key strategic mineral, lithium, required to manufacture batteries for EVs. Although the country has almost a dozen lithium battery manufacturers for EVs, the country is nearly 80 percent dependent on China, India’s No.1 foe across all its borders, for the supply of lithium and lithium-ion. Such a heavy reliance on China for a strategic raw material such as lithium to make EV batteries could put India’s new age vehicles manufacturing plan at risk if the current tensions between the two countries persists or even escalates.
India must tie-up with other lithium producing countries for the import of the mineral before embarking on a major expansion plan for EVs. Other than China, Australia and Chile are two key producers of lithium. In fact, Australia is the world’s largest producer of lithium. Chile comes next. A bulk of Australia’s lithium export goes to China, itself sitting over the world’s third largest lithium deposits. Australia would rather have a diversified market for its lithium exports, including India, than sending the mineral mostly to China and the US. Argentina and Brazil are the two other major producers of lithium although their combined output would be only around 14 percent of Australia’s mined lithium. Other critical raw materials used in Li-ion batteries include graphite, cobalt and manganese.
According to India’s Heavy Industries Ministry secretary Karman Rizvi, the country aims to become a global leader in EV sales by 2030 with the new-age non-emission vehicles accounting for 30 percent of all automotive sales. However, Rizvi does not provide much information about the government’s plan to meet the growing demand for lithium to manufacture EV batteries in India on a sustainable basis. Going by the country’s automobile sales record per 1,000 of its population, India is way behind the countries such as the US, Japan, New Zealand, Australia, Poland, Italy, the UK, France, Germany, Canada, China, and Poland. In 2020, the number of registered vehicles in use per 1,000 inhabitants was 869 in New Zealand. At 24 per 1,000 people, India’s car penetration ratio compares poorly with the world average of 314 in 2022, according to the World Road Statistics by the International Road Federation and Crisil Market Intelligence & Analytics.
Last year, the number of registered vehicles sold in India was 41,00,258, recording an impressive 8.3 percent growth over 2022, when the industry was reeling under the shortage of semiconductors. It is true that the demand for vehicles powered by traditional fuels is shifting towards alternative fuels. The sales of petrol-run vehicles dropped from 86 percent in 2020 to 76 percent in 2023. While much less pollutant EVs are most welcome in India, the country must prepare itself to commercially as well as strategically sustain such a change. To make the EV expansion policy sustainable, the country must widen its lithium import network to drastically cut the import of the key component of EV battery production from China until it is able to exploit its own new-found lithium deposits. India’s hostile neighbour is not only exporting lithium but also a large range of electric vehicles to India.
Presently, China is home to over 50 percent of the world’s EVs. Its close proximity to raw materials used in manufacturing EV batteries has helped the country’s large presence in the global EV market. The EV industry is being heavily pushed by the Chinese government offering various incentives to tackle operational hurdles, leading to innovation of core technologies. Last year, EVs made up 31 percent of all car sales in China. Now, China has targeted India for expansion of its global EV market. Lately, BYD Co., China’s top automobile maker, launched its third electric car in India. It introduced a premium electric sedan, Seal, with price starting at Rs.41 lakh. In 2023, Guangdong-based BYD sold 1,877 cars in India, a 314 percent jump over the previous year.
The future of the global EV market is still not very clear. The automobile industry in many parts of the world is studying the sustainability of the product if and when the market booms up. Its repair and maintenance cost could be quite high. Lately, the US media has been critical about the Biden administration’s campaign to replace internal combustion vehicles (ICVs) with EVs to reduce carbon emission. It is said that EVs will have a “miniscule” climate impact. According to the American Enterprise Institute’s Benjamin Zycher, the US Environmental Protection Agency’s own assumptions project that the new regulations such as favouring a switchover to EVs from ICVs will mitigate global warming by 0.023 degrees Celsius by 2100.
The standard deviation of the Earth’s surface temperature record is 0.11 degrees Celsius, “that effect would not be detectable.” Another interesting observation is that each half-ton battery for “clean” vehicles will require digging and processing 50 to 250 tons of earth for copper, nickel, aluminium, graphite and lithium, the prices of which will increase (consequently raising the vehicle prices) when the easy accessed supplies decrease. The International Energy Agency (IEA) points out that hundreds of huge new mines will be required, each taking a decade or more to open.
India must consider all these aspects before jumping into the EV bandwagon. It would be wrong to ignore the market size of the global automotive industry which was valued a t US$3.565 trillion in 2023. The market size is expected to grow at a CAGR of 6.77 percent between 2023 and 2033, when it is projected to reach $6.861 trillion. A global thrust for EVs will substantially raise the demand and prices of critical minerals such as lithium, nickel, copper and graphite as raw materials to produce batteries with lasting power. India must develop its lithium supply chain through various means, including leveraging private and public industries to sustain its future sectoral growth and to fix strategic vulnerabilities.
Last year, India’s Ministry of Mines released a list of ‘critical minerals’ which ‘are essential for economic development and national security’ and whose ‘lack of availability’ or ‘concentration of extraction or processing in a few locations may lead to the disruption of supply chains. Lithium is categorised as a ‘strategic’ mineral, placing it at the top priority list. Fortunately, recent discoveries of lithium reserves in Jammu & Kashmir, Jharkhand and Rajasthan have attracted the attention of both the government and private players on mining the mineral. The next government should make a comprehensive assessment of the situation and formulate an EV manufacturing policy in consultation of the industry. Until then, EV imports should attract punitive taxes and non-tariff restrictions. The concerns of the domestic automobile manufacturers need the full government attention. (IPA Service)
By Nantoo Banerjee