EVs, EVs, EVs... and floods! – Issue #62
EV Sector Buzz: Tesla and BYD eye India market; indigenous EV component industry thrives, but sluggish growth challenges EV adoption. And floods.
News of the week
What were the major developments last week?
The EV sector hit the headlines multiple times. As a precursor to its entry, Tesla has asked its battery suppliers to begin talks with the Indian government to set up battery manufacturing units in the country. The first company to initiate talks is Panasonic. More details emerged about Tesla’s plans for India. Its factory will produce 500,000 cars annually. Their starting price will be about Rs 20 lakh. This will be worth watching. The biggest EV player in the passenger car segment is Tata, which has sold about 55,000 Nexon EVs since its launch – Rs 5 lakh cheaper than the Tesla.
Also came news that Tesla’s arch-rival, China’s BYD, wants to invest $1 billion to build batteries and EVs in India. Its decision to enter India, wrote Business Standard, is a part of its rapid global expansion to challenge Tesla. “If the Indian investment is approved, it would give BYD a presence in all major car markets except the US.” BYD will come out with cheaper EVs and SUVs, so it will follow a mass (versus class) model for dominating the Indian market.
At this time, despite falling FDI inflows into India, the government’s stance on BYD is unclear. Business Standard’s initial report on BYD’s India plans had a government official saying India is “happy to welcome anyone who wants to invest”. A day later, however, the Times of India reported "discomfort in the home and external affairs ministries over the entry of Chinese players”. According to the paper, bureaucrats in these ministries flagged “security concerns” as well as the limited role of the Indian partner. “Many joint ventures ‘arranged’ by the Chinese companies... are ‘heavily weighed and controlled by the foreign partner’, while the Indian company is more or less a dummy entity, with little control on technology, decision-making, and other critical know-how," the newspaper wrote.
One wonders what happens next. India has been tightening FDI rules for Chinese companies. Great Wall Motors has struggled to enter India. MG Motors too has struggled to get new investments into India for expansion. It is now working on a proposal to sell a majority stake to an Indian partner.
Even as these companies tussle to enter India, more heartening news came from India’s automotive component industry. A clutch of companies here are seeing an increasing amount of their sales coming from global EV companies. This is one of the first signs that, PLI or no PLI, an indigenous – and globally competitive -- ecosystem for EV manufacturing is taking shape in India.
These companies are ahead of the curve. The domestic market for EVs is still very small – and slowing further, thanks to the government’s decision to slash FAME subsidies. E2W sales dropped to 40,000 units this June, the lowest since February 2022.
Hardwired into all this is a larger question about policy-making. In EVs too, India's targets, although unofficial, are aggressive. In 2021, Nitin Gadkari said 30 per cent of private cars, 70 per cent of commercial vehicles and 80 per cent of two and three-wheelers would be electric by 2030. Two years earlier, Niti Aayog had pulled up two-wheeler makers for being unambitious when they opposed a government proposal that wanted them to migrate their entire sub-150 cc 2-wheelers to electric by 2025.
After all that hype, India’s EV market is growing slowly. This is a puzzle – despite high oil prices, EV sales are low. The high initial cost might be one possible reason. Which brings us back to the FAME subsidy.
Loath to raise prices, companies are rushing to launch trimmed-down models which come close to the original price. With batteries accounting for the largest chunk of the cost, that is where the axe is falling. Nearly every company is working to reduce battery sizes from 3 kWh to 2/2.5 kWh range, a component supplier to the e2W industry told Business Standard. This comes with its own implications. As the newspaper wrote, the range will come down – to as low as 70 kilometres on a single charge. This is another deterrent to adoption.
There are of course other signs that are more encouraging for the space. Tube Investments of India, for instance, wants to launch electric tractors.
Elsewhere in the country, the Adani Group’s efforts to recover from Hindenburg continue. Last week, the Maharashtra government gave the group the final permission to redevelop Dharavi. The group is also resuming acquisitions. It wants to pick up Vidarbha Industries Power, the bankrupt firm belonging to Anil Ambani which owns a 600 MW coal-fired power plant in Nagpur.
On another front, that of attracting fresh investors, the group continues to struggle. Only GQG has invested since the Hindenburg report. The group has also tried raising bonds from the domestic market – and its cost of borrowings has gone up. This time around, these bonds were issued with a yield of 10 per cent. To put that in context, as Reuters reported, the group had last raised funds through bonds in September 2022 at an 8.40% yield. “Local investment bankers are still shying away from dealing in the debt of Adani group companies, which could have driven them to prefer direct placement with select investors,” said the newswire.
Other news. Gatik Ship Management, which emerged from nowhere and began shipping loads of Russian oil to India, has cut its fleet to just four ships as companies helping trade in Russian commodities come under increasing scrutiny. A surge in duty-free solar imports from southeast Asian countries that have free trade agreements with India has raised suspicions of China routing supplies through them to escape customs duty.
Southern Europe is in the grip of a heat wave. John Kerry has flatly refused to pay countries damaged by floods, storms and other climate-driven disasters.
More news of the week
Much of northern India is flooded. By the tenth of this month, the northernmost reaches of this country had slipped into trouble.
Ladakh had received much more rainfall than ever before. Landslides had blocked the highway connecting Jammu to Srinagar. With rains triggering landslides and rivers like the Ravi, Beas and Sutlej turning into unstoppable torrents, Himachal had been bludgeoned. Read this account to see what those days were like in the state. And hear this interview to see how the state arrived at this sorry pass.
Even as these regions tally up their losses, misery spread further south.
Punjab flooded as well. One reason is the state’s drainage department which, despite multiple requests, failed to clear water channels under a railway bridge near Jallandhar. As this report tells us, only 3 of the 21 channels under the bridge were operational. The rest had mounds of silt rising as high as 12 feet. When the swell in the Sutlej reached the bridge, waters backed up – and the Jallandhar district saw flooding. This is the second time in four years the district has seen flooding.
Between swollen rivers and heavy rains, parts of Haryana got flooded as well. Here is Ambala. In all, as many as 416 villages in the state got flooded. In response, the state cranked open the floodgates to the Yamuna which resulted in Delhi flooding as well. Familiar tableaus played out yet again -- like “vehicles floating like paper boats on inundated roads, muddy waters gushing into residential areas, temples and other structures submerged on the banks by the swollen rivers and land cave-ins”. One also got to see more unfamiliar scenes. As the Yamuna reached its highest flood levels in over 40 years, its waters reached as far as Rajghat, ITO and the Supreme Court.
Over the last week, there has been a lot of commentary about the ecologically-blind construction boom which has exacerbated the effect of the heavy rains – like this superb blog post by Avay Shukla. Apart from that, as the Punjab Drainage Board illustrates, there is also the bit about state governments basically failing to think. It didn’t strike the drainage board that one outcome of not desilting might be floods. Just as, mere weeks ago, it didn’t strike the UP government that scheduling power cuts in the middle of a heatwave might carry public health implications.
Climate-reads of the week
Why India's solar canals are losing their investment potential. (Eco-Business)
Shell’s CEO tries to backtrack on climate promises and Bill McKibben is there, waiting. (New Yorker)
Another offsets giant is losing its way, degenerating into greenwashing. (Source Material)
‘An Act of War’: Inside America’s Silicon Blockade Against China. (NYT)
George Monbiot, on why we are not paying attention to a new paper on the rising chances of simultaneous crop losses in the world’s major food-growing regions (Guardian)
Think critical minerals, and you will think of geopolitics – and the race between nations to capture these reserves. (Phenomenal World)
Two more Cheetahs have died – this time due to a maggot infestation caused by their radio collars. This gets worse and worse. Do read this report as well in The Wire.
Hydrogen Is the Future—or a Complete Mirage. Excellent piece from Adam Tooze (Foreign Policy). Also see this piece from India, questioning our own hoopla.
What’s stopping India from achieving its biogas ambitions? (Morning Context)