GTRI flags concern against India of becoming 'EV colony' for China

The government should allow the domestic electric vehicle sector to grow naturally without relying on incentives as it would avoid India becoming an 'EV colony' for China, think tank GTRI said on Friday.

India faces unique challenges not faced by other countries in adopting EVs (electric vehicles) at large scale, it added.

These challenges include 80 per cent of electricity generated from fossil fuels like coal, frequent power cuts, and dependency on imports for making EVs in the country like batteries and critical minerals, the Global Trade Research Initiative (GTRI) said.

"Considering these challenges, instead of rushing into the fray with heavy incentives or falling into dependence on Chinese imports, India has the opportunity to let its EV sector evolve naturally. By allowing market forces to steer the sector's growth, India can avoid becoming an 'EV colony' for China and carve out its own path in the global EV landscape," it added.

It also said the global EV market is undergoing a seismic shift, driven by the US, EU, and Canada imposing high tariffs and restrictions on imports of EVs and parts from China.

These regions make up about half of China's global EV exports and in a strategic pivot, China is moving its production to ASEAN countries and setting its sights on India.

"These production units would still depend heavily on imports from China, with 70-80 per cent of parts, including batteries, coming from there. Thailand, the first to allow local production by Chinese firms, is already facing challenges with rising imports and complaints of lower sales from established manufacturers," GTRI founder Ajay Srivastava said.

He added that there is also a risk that China might dump excess EVs in India as access to developed markets becomes tougher.

The GTRI suggested that India should focus on capturing leadership in the next phase of EVs, using a new generation of batteries.

Increasing investment in research and development (R&D) for advanced battery technologies, battery recycling infrastructure, and supporting clean energy sources to power EV charging stations are some of the steps which would help boost the sector's growth, it added.

Hi-Tech Gears Chairman Deep Kapuria said the world EVs market is all set to face more turbulence and structural transformation as the sector is witnessing several trends that are driving its growth.

"Firstly, many countries (developed and developing) are offering subsidies, tax benefits, and other incentives to encourage consumers to switch to electric cars. Secondly, the macroeconomic factors, such as the availability of critical minerals like lithium, cobalt, and nickel, essential for battery production, can positively impact the growth of the EV industry," Kapuria said.