S. Ray - Global Value Chains in autos and EVs: experience of India
Type de publication:
Compte Rendu / ReportAuteurs:
Monaco, LorenzaSource:
Report of the Gerpisa monthly seminar, Online (2022)Notes:
Saon Ray, ICRIER, Delhi.
Texte complet:
Global Value Chains in autos and EVs: experience of India
Promoted by the GERPISA WG on “The Global Auto Industry: Value Chains, Emerging Players and the Global South”, the seminar given by Saon Ray (ICRIER, New Delhi) brilliantly responded to our intention to shed light on emerging auto industries in the Global South, and to discuss the issue of GVC-led auto industrialisation connected to the process of electrification.
Compared to the other neighbouring giant, China, the trajectory followed by the Indian auto industry is way less explored. Still, the industry represents an extremely large and dynamic market, which has developed under peculiar policy directions,[1] and today offers widespread opportunities for further expansion, despite its weaknesses and structural imbalances.
Today, the Indian auto industry contributes to over 6% of GDP, providing direct employment to 8 million and indirect employment to over 29 million people. Annually, the country exports over 5mln vehicles and sells over 17mln vehicles on the huge domestic market. Whilst already dominating the two-wheelers segment, the country aims to become a proper, global automotive hub.
But how can India increase its international presence within the global auto value chain, when its global integration is still limited and its industrial development path has been significantly pulled by domestic opportunities and based on home grown firms?
If we follow Ray’s definition of GVC participation as the sum of the share of foreign value added in gross exports (backward linkages) and the share of domestic value added in exports of intermediate goods (forward linkages) – India fares pretty low, with a participation index that does not go beyond 40% (combining the two measures from buyer and seller perspective).
If we dig deeper, we should consider GVC participation as a combination of the capacity to join a GVC (by tasks performed), capacity to stay within a determined GVC (competitiveness), and the capacity to move up the chain, by fostering innovation and learning.
In order to explore challenges and opportunities for furthering GVC integration, Ray investigates India’s prospects in the construction of an EV value chain. Analysing the period from 2015/16 until now, India has seen a substantial increase in the sales of both electric two-wheelers and four-wheelers (from 20,000 to 155,000 in 2019-20). However, the EV value chain is still at its infant stage, with battery production that barely started and the majority of EV parts still imported. In absolute terms, between 2012 and 2021 the value of imports related to battery storage, charging infrastructure and overall EV manufacturing has significantly grown (with battery storage more than doubling in value, from 896 USD mln to 2203 USD mln). Looking at further expansion, the biggest gaps exist in relation to battery and motors manufacturing, with the former facing particular constraints because of scarce availability of raw materials at local level.
Despite limited resources and technological constraints, the Government of India has promoted important initiatives to incentivise the creation of an EV market – in 2020 it launched a National Electric Mobility Mission Plan, and it recently introduced a production-linked incentive scheme, the ‘National Programme on Advanced Chemistry Cell Battery Storage’. At the same time, a number of new federal policies (ex. FAME II, PLI ACC and PLI Auto) focused on the creation of a competitive EV ecosystem for India, while complementary state policies included the provision of additional incentives. Indeed, state policies were particularly pro-active, involving the provision of capital cost subsidies to attract investment (Kanuri et al., n.d.) and other incentives including advantages in terms of taxation and interest rate (both supply and demand side measures). In strategic terms, one of the key issues remains how to shape leaders in the sector, by encouraging process, product and functional upgrading, helping firms to scale up and move into higher value and skill activities.
Ultimately, for the establishment of a strong EV value chain in India, important challenges remain: first and foremost, in relation to the amount of investment that would be needed to reach the desired targets in EV productions, sales and infrastructure provision (estimated $180 billion, according to Singh et al, 2020). From a firm perspective, significant concerns are expressed with regard to the availability of local component suppliers, and the cost and availability of raw materials, battery cells and semiconductors. With reference to overall investments in electric mobility, policy barriers are identified around the too stringent/early localisation requirements, the existing (or lack thereof) regulations in terms of end-of-life/recycling, and the insufficient incentives towards charging infrastructure.
Overall, India seems to be dedicating increasing attention and significant policy efforts to the creation of an EV value chain, seen as having the potential to increase the international integration into the global auto chain, and to boost new opportunities for local productive capabilities and infrastructure development. At the moment, a conducive ecosystem is yet to be developed, and important bottlenecks/ structural problems persist.
Big questions remain, about the pattern of GVC integration, about local capabilities and skills and the type of competitive advantages used to channel such integration, and about existing mobility infrastructure (issues re. road congestion in large cities are of particularly difficult solution).
What road will India choose?
[1] See also Monaco, L. (2014) ‘Industrial Policy and the Auto Sector in India: Developments and Challenges Ahead’, in L’Industria – rivista di economia e politica industriale, special issue on ‘The Extra-European Industry: Firms, Markets, Sectors and Policies’, Year XXXV, n.3, pp. 461- 487.
Connexion utilisateur
Navigation
Agenda
Journée du Gerpisa
Vendredi 6 Octobre 2023, 14:00 - 17:00 CEST
|
Journée du Gerpisa
Vendredi 10 Novembre 2023, 14:00 - 17:00 CET
|
Journée du Gerpisa
Vendredi 15 Décembre 2023, 14:00 - 17:00 CET
|
Journée du Gerpisa
Vendredi 9 Février 2024, 14:00 - 17:00 CET
|
Journée du Gerpisa
Vendredi 8 Mars 2024, 09:00 - 17:00 CET
|
Journée du Gerpisa
Dimanche 14 Avril 2024, 10:00 - 17:00 CEST
|
Journée du Gerpisa
Vendredi 10 Mai 2024, 14:00 - 17:00 CEST
|