Electric vehicle industry continues to lose charge on localisation woes

Poses a hurdle as cells, which account for half the EV price, continue to be imported

The tieup between conglomerate JSW Group and SAIC Motor Corporation-owned MG Motor India to manufacture electric vehicles (EVs) has recently captured attention, with their focus on localisation as well.

However, localisation still poses a hurdle for the EV industry, as cells that contribute to almost 50 per cent of the EV price are still being imported from China and South Korea.

According to industry experts, the entry of players like JSW-MG Motor and the aggressive EV road map by companies like Reliance Industries, Ola Electric, and Hyundai Motor India (HMIL) may help India overcome this crisis, as deep localisation levels will gradually increase.

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For consumers, localisation is vital as it will help bring down prices too. This comes at a time when Sajjan Jindal wants to create his own “Maruti moment” in EVs.

JSW MG Motor India is planning to invest $5 billion in Odisha to set up an integrated EV complex in Cuttack and Paradip. However, experts cite that it will be a two-step process for all these players to localise the components of EVs, with an initial investment in battery assembly and later on cells.

Already, a higher level of localisation is happening in battery packs, powertrains, digital and electronic items, and motors.

“Battery localisation is very important for domestic and export markets. At present, all cells are imported to India from China or South Korea. In the first phase, these companies may be doing battery pack manufacturing and then moving into cell manufacturing after two to three years,” said Mahesh Godi, founder and chief executive officer (CEO) of Godi India, which is set to become the first Indian commercial manufacturer of lithium-ion (Li-ion) cells.

“Different finishing material localisation also needs to happen,” he added.

Take the case of HMIL. The company has announced plans to invest around Rs 26,000 crore over 10 years in Tamil Nadu. This investment will also include setting up a battery assembly plant in Tamil Nadu.

“As part of our dedication to the holistic development of the EV ecosystem, we have announced investments in battery assembly units, and we are actively enhancing charging infrastructure as well,” said Tarun Garg, chief operating officer, HMIL.

Experts highlight that for some period, the country will have to depend on imported batteries.

“The importation of battery cells continues and is expected to persist for a significant period as the ongoing investments in cell manufacturing require time to show results,” said Sohinder Gill, CEO, Hero Electric.

Regarding localisation, powertrain components such as motor controllers, electronic control units, chargers, and batteries have achieved a notable level of localisation, primarily at the Tier-I level, Gill said.

“However, Tier-II and Tier-III still rely on imported essential items that are either unavailable in India or fail to meet required quality standards. No country has achieved complete localisation across all tiers, highlighting the interconnectedness between continents and countries,” he added.

The key question revolves around whether localisation is based on extensive research and development or simply focuses on basic operations. Experts like Gill believe that there seems to be a gap in this aspect, and supply chain vendors aiming to excel in EVs must accelerate the integration of indigenous or offshore state-of-the-art technology into their strategic plans.

According to Anurag Singh, managing director at Primus Partners India, key policies of high tariff barriers for fully built EVs and incentives like the production-linked incentive scheme and Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India have spurred large investments from Indian, multinational, and startup companies into the EV value chain.

“The value chain takes time to develop, and though India may be behind some countries like China and the US, it will soon catch up,” he added.