Basic necessities for making an EV battery, like aluminum and copper current collectors, are not available in India. Firms making them are based in Korea, Japan and China
The central government has fined Indian EV manufacturers for misappropriation of subsidies over the claim that they were not sourcing components indigenously as required by the FAME II scheme.
The FAME II scheme in India is a five-year subsidy programme (applicable from April 1, 2019). It aims at escalating the electrification of public and shared transportation (7,000 electric and hybrid buses, half a million electric three-wheelers, 55,000 electric four-wheeler passenger cars, and a million electric two-wheelers) through a budgetary support of 10,000 crore.
It provides electric two-wheelers with a maximum subsidy of 40 per cent on the total cost of the vehicles if the selling cost of goods from the seller’s factory is Rs 1.5 lakh per unit and has at least 50 per cent of domestically manufactured components in their vehicles.
But, it is important to consider whether local supply chains and EV manufacturing infrastructure are even available in the country to fit the criterion of the FAME scheme.
The in-use vehicles from these manufacturers were traced and taken apart to check the origins of their components and not for mechanical faults in the vehicle which jeopardise people’s safety .
Checks were not conducted beforehand to ensure the OEMs’ compliance with FAME II regulations before handing out subsidies to them.
While the government wants to support OEMs with electrification, the EV programme could do with a thorough review of the strategy deployed to achieve these goals.
The government has set a 30 per cent target for 2030. While setting targets is important, it is equally important to create an ecosystem that will help achieve those targets.
According to an April 2023 report by The Economic Times, at least six new electric two-wheeler models (by OEMs like Hero Electric and Bgauss) certified by Central Motor Vehicles Rules (CMVR), 1989 waited for months to be enrolled on the National Automotive Board portal to claim the FAME II subsidy even though they were compliant with the CMVR regulations.
Local supply chains and manufacturing infrastructure for EVs are missing. Basic necessities for making an EV battery, like aluminum and copper current collectors, are not available in India.
To manufacture lithium ion batteries for EVs, the manufacturer needs equipment and machinery. These are not available and have a long waiting period.
That is because specialised equipment companies that manufacture them are few. They are based in Korea, Japan and China.
At the moment, these companies have large order pipelines from Southeast Asia, Europe and the US where multiple gigafactories are being built. India could use this situation as an opportunity to incentivise manufacturing R&D and develop its own machinery.
It will make sense to start with megawatt factories or smaller manufacturing units in the country first to align with domestic demand before moving on to gigafactories to meet the country’s 30 per cent fleet electrification target by 2030.
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