India should tie up with Taiwanese, Korean,US and Japanese makers of neodymium magnets, electronic controllers and key components in electronic manufacturing instead of bothering too much about rare earths.By Sandip Sen
Replacing Chinese products is easier said than done. The dragon has over the past thirty years built up its manufacturing capacities, which India has not. After liberalisation of the nineties, India has become one of the largest markets for computers, telephones, bulk drugs, organic chemicals, solar energy and electric vehicles. But it has not developed core manufacturing capability and has been a peripheral assembler where over 50 per centof the critical components have to be imported into the country for production. We do not have a conducive ecosystem for manufacturing, and while politicians over the past seventy years have been devising new slogans to urge self dependence, they have lacked the spine to change the IAS dominated bureaucracy, that makes doing business in India so very difficult.
Despite being a huge market, global manufacturers have avoided India as a production centre and prefer other locations even as they move out of China. As per a Nomura report, of the 56 companies which relocated from China between April 2018 to August 2019, only 3 came to India. 26 firms relocated to Vietnam, 11 to Taiwan and 8 to Thailand. All these nations have minuscule domestic markets in comparison to India, but have business friendly policies and technocrats that help bring about transformation, much like in China. Since India develops no technology specific actionable plans, we thought of looking at the technical strength and weaknesses sector by sector after discussing with the stakeholders the challenges to Make In India. This week we deal with Electric Vehicles from two and three wheelers to the electric car and bus.
Rare earths dominance does not make China indispensable:
I have followed China’s EV development since its inception and first wrote about
it in the Economic Times a decade back when China had more than 2000 small scale producers manufacturing 30 million electric two wheelers annually. Indian manufacturers produced 200,000 electric bikes annually at that time and SIAM and the big two wheeler producers were clearly not interested in EV. Behind China’s success was the fact that the state had an actionable technology plan and had invested RMB 800 million in the 863 fuel cell project conceived by Chinese Engineers and Scientists under Deng XiaoPing. They created several common service facilities that small entrepreneurs could use to access technology and provided finance.
China invested not only in the mining and processing of rare-earths but also became a leading producer of electric controllers, DC motors, miniature circuit breakers, axle assemblies, brushless motors, lithium ion batteries along with solar panels, charging stations, and storage systems. India started a decade later. The electric two wheeler market is dominated by Bajaj, TVS, Honda and Hero. Today Neelam E Rickshaws of Ludhiana, Delhi based Saarthi and Bahubali, Tamilnadu based Ampere, Hyderabad based Gayam and other MSME units make lakhs of high quality E rickshaws every year competing with the likes of industry heavyweights like Mahindra and Kinetic who have recently entered the field. Other than the axle and the controller all parts are made in India. Sona Steerings and Bharat Forge need to speed up the axle projects to improve localisation. E rickshaws mostly use lead acid batteries and for lithium-ion batteries, they import from China. That could change in the near future, as Suzuki is investing Rs 5,000 crores in Lithium-ion batteries as electric car and bus manufacturing cannot really succeed without indigenously produced batteries.
China took the lead in storage technology around the turn of the century. China Investment Corporation made sizeable investments in mining and processing of rare earths after the nineties with facilities in China and South America, as a result of which they control 70 per centof the market. It took them more than a decade of sustained investment to mine and process Neodymium, Lanthanum, Didymium, Cerium, Erbium, and over a dozen other rare earth materials. They enjoy near monopoly positions in lithium-ion polymer batteries and magnets of the iPhone and iPad, solar batteries, high tech cameras that have lanthanum oxide priced at 15,000 RMB/ MT, and neodymium oxide priced at 350,000 RMB/ MT. But India need not really bother about raw material supplies because China cannot stop supplies to major global storage battery makers which include Toshiba, Panasonic. Tesla, Suzuki, Nissan, LG Chem and several others.
The transformation will be easier in the car and bus segment where large players like Suzuki, Hyundai, Tata and Ashok Leyland operate. Just like India convinced Suzuki to start a lithium ion battery factory in Gujarat which in turn roped in Toshiba and Denso, it needs to convince Hyundai, LG Chem and Panasonic who have major presence in India to speed up investment plans in India for lithium-ion storage systems. Similarly it should tie up with Taiwanese, Korean,US and Japanese makers of neodymium magnets, electronic controllers and key components in electronic manufacturing instead of bothering too much about rare earths, considering our investment limitations. India needs a route map for indigenisation for the manufacturing industry that shows how to reduce import dependence in key areas where imports are high value. Only if we follow a planned exit can we actually reduce our import dependence on China.
Source: indiatimes.com
