Daily Update: May 7, 2024

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Interest from India Shakes Up Conventional Wisdom on EVs

When analysts look at the global market for electric vehicles, they usually focus on China, Europe and the US. The popular narrative of a three-way war for EV dominance usually includes modest EV adoption numbers for the rest of the world. The assumption is that the Global South will be content with internal combustion engine vehicles for the foreseeable future, delaying the energy transition and providing hope to oil producers globally. However, there is some evidence that India will not be satisfied with hand-me-down transportation technology from the developed world. The government of Indian Prime Minister Narendra Modi has been working to attract global EV manufacturers to India as the country introduces incentives to grow a domestic EV manufacturing capability.

Indian policy has been focused on reducing dependence on oil imports and trimming emissions 45% by 2030, even as the Indian economy rapidly grows. At the 2021 UN Climate Change Conference, Modi announced plans to achieve net-zero emissions by 2070. EVs are seen as a key technology to reduce dependence on imported fossil fuels and get emissions under control.

S&P Global Mobility forecasts demand for lithium-ion batteries in India to surge to 139 GWh by 2035 from 4 GWh in 2023. Most of this demand is likely to come from light passenger vehicles such as the Nexon from Tata Motors, which is India’s biggest battery cell customer.

With more EVs being developed and manufactured in India, the supply chain for batteries and battery metals is becoming a concern for Indian EV manufacturers. India imports most of its EV batteries from China, Japan and South Korea, although the percentage of domestically sourced batteries is expected to grow to 13% by 2030, according to S&P Global Mobility. A tight market for critical minerals associated with lithium-ion batteries has attracted investment and innovation in alternatives. Nickel-cobalt-manganese, nickel-cobalt-manganese-aluminum and sodium-ion technologies are being developed to meet different ranges that may be more appropriate to typical Indian vehicle use patterns. 

Among the initiatives that the Indian government has announced to attract more EV manufacturing is a reduction in customs duties to 15% from 70% on completely knocked kits, or ready-to-assemble parts, for electric cars, provided a car company commits to invest a minimum of $500 million and establish an EV manufacturing plant in India within three years. Indian policy is designed to increase the localization rate of EV manufacturing to 50% from 25%. Negotiations between the Indian government and EV manufacturer Tesla began before Tesla CEO Elon Musk visited India in June 2023. Tesla is evaluating local manufacturing in India, and Vietnamese automaker VinFast is building an EV plant in the southern Indian state of Tamil Nadu. Many Indian manufacturers are forming joint ventures with international car companies to develop local EV knowledge.

Today is Tuesday, May 7, 2024, and here is today’s essential intelligence.

- Written by Nathan Hunt.

Read all of our research and insights here.