Status of localization for small electric cars in India | Localisation needed to realise true benefits of e-mobility

In the lead up to 2030, we expect about 50 million cars to be on Indian roads. The automotive sector is a key driver of India’s economic growth and a key medium to accelerate the Make in India program. There is an urgent need to holistically explore alternate powertrains in the current and future scenarios from the perspective of India’s Import Dependency, Carbon Emissions and the Economic Impact or Cost-Benefit analysis from the Government’s perspective.

This article was first published as a part of May 2021 edition of EVreporter e-magazine.

Issues associated with projected PV growth

The transport sector consumes 40% of India’s oil, a large part of which is imported. A significant 22% of the entire import bill i.e. USD 111 Bn worth of oil was imported in FY19. Passenger Vehicles account for 36% of petrol and 22% of total diesel consumption in the country. On average, the fuel import cost for an ICE based PV in India is ~ INR 20k/car/year assuming an average run of about 12,000 km per year. The projected growth in passenger vehicle UIO (units in operation) poses a threat to India’s vision of reducing crude oil import.

The other issue is of manufacturing import dependency. In spite of efforts by OEMs towards localization, there is still a sizable dependency on imports for automotive manufacturing. India imported USD 17.7 Bn worth of raw material and components in FY 19.

Last but not the least is the issue of emissions as the transport sector is a key contributor to CO2, PM2.5 & NOX emissions. Particulate emissions have been addressed to a good extent as a result of leapfrog to BSVI last year. This led to a significant reduction in PM2.5 emissions, however, the issue of carbon emissions was not addressed by BSVI.

The impetus towards electric vehicles will address the problem of carbon emissions only partially as power generation from fossil fuel sources in India leads to high emissions. Towards 2030, EV emissions will reduce substantially as the renewable energy mix improves to about 25%.

There are alternate powertrain options that have the potential to address the issues noted above. Fossil fuel based technologies like Ethanol and CNG can reduce the fuel import bill as compared to ICE, and with a good degree of localization. On the other hand, electrification based technologies have a much larger impact on fuel savings but will have to largely depend on component imports as the supply chain is still in a very nascent stage.

Other alternate powertrains

As of today, an average ICE based passenger vehicle in India uses imported components worth ~INR 0.98 lakh and uses imported fuel worth ~INR 2.97 lakh over its lifetime (ie. assumed 15 years with an average run of 12,000 km per year). This leads to a total import cost burden of ~INR 3.95 lakh per vehicle.

Alternate fuels like Ethanol and CNG use similar ICE engine and hence while the manufacturing import cost remains roughly equal, there are substantial savings on oil import as these fuels are largely procured domestically.

EVs on the other hand provide huge benefits on import cost through fuel savings but this is offset with the huge amount of imports as currently the supply chain for critical components is not developed in India. Lastly, hybrids provide a substantial reduction in fuel cost savings but the total import bill is slightly higher than ICE owing to higher component imports.

Hence, there is an immense need to localize the EV supply chain to unfold the complete benefits of EV in terms of the overall cost.

EV perspective

EVs are currently subsidized leading to negative government income and score low on import cost savings and emissions. Net localization levels are currently very low. There is a need to do more to localize the supply chain and harness more renewable energy so that the real benefit of these technologies can be leveraged in the Indian context.

EVs will start showing benefits in import bill reduction in next few years assuming localization levels of 50% in motor controller from 2025 onwards and 60% localisation in the battery by 2030. The remaining 40% localisation in the battery may not be possible due to the unavailability of raw materials in India.

Policymakers in India have always been cognizant of the importance of localization of the EV supply chain. This has been debated since the formulation of the National Electric Mobility Mission Plan 2020. The first serious effort was made as xEV one program under FAME-I with an aim to achieve standardization and economies of scale for critical components. The program did not see expected success due to OEMs backing out from the initiative.

The current level of localization for small car electric vehicle in India

India is targeting reduced Import Dependency and Local Manufacturing through multiple measures from Government with ‘Atmanirbhar Bharat’ being the key direction. India has devised a 3 pillar strategy to promote local manufacturing ecosystem development for EVs – FAME-II, Import Restrictions & Fiscal Incentives or PLI to support local manufacturers to develop the capacity to make and scale the EV components.

3 Government initiatives supporting the overall ecosystem development

FAME-II Localization Criteria to develop assembly-level capability. The current focus is to strengthen Tier-1 in India with no strict check on net localization. Net localization might improve as the industry achieves a large volume in future. Govt has been shifting the timeline due to localisation challenges faced by stakeholders.

PMP Scheme to increase the local content in the component assembly listed under FAME-II localization Criteria. Under PMP, the government charged zero duty for child parts till 2021. The import duty on child parts is directed to a hike of 15% to push the local manufacturing of AC/DC Charger, AC/DC Motor, Motor Controller, Power Control Unit, Energy Monitor, Contactor, Brake System for recovering, Electric Compressors.

Incentive Schemes for suppliers to develop the capability to serve India and export markets. These schemes are likely to be significant in developing Tier 2 and Tier 3 level capability. On Nov 11, 2021 – The government announced a PLI scheme of ~INR 1.5 Lakh Crore to boost local manufacturing in multiple sectors. For battery makers, cash subsidies will be provided depending on the Local Value Addition and the Scale of Production (GWh). It remains to be seen how feasible the execution of this scheme is and how the manufacturers respond to the terms drafted for localization targets.

About the author

Preetesh Singh, Manager at Nomura Research Institute Consulting and Solutions India. He can be reached at

Extensive contribution by Shravan Banot, Deputy Senior Consultant at NRI

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One thought on “Status of localization for small electric cars in India | Localisation needed to realise true benefits of e-mobility

  • Solar Electric car would be more ideal, to India, why ev cars are not designed in such a way.


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