India Reconsiders EV Push Amid China’s Rare Earth Curbs

GS3 – Economy

Context

India’s push for Battery Electric Vehicles (BEVs) faces challenges due to China’s export restrictions on rare earth magnets, necessitating a policy reassessment.

Key Concerns:

• Overdependence on China:
  • China dominates battery processing of lithium, cobalt, and nickel.
  • India’s EV targets are susceptible to supply shocks and geopolitical coercion.
• Inequitable Subsidies:
  • EV tax benefits disproportionately favour middle/upper-middle class four-wheeler buyers, raising equity issues.
• Weak Charging Network:
  • World Bank: Charging infra investments are 4–7x more effective than purchase subsidies.
  • India’s charging infrastructure remains inadequate and skewed.
• Grid Concerns:
  • India’s power grid remains coal-reliant, reducing EVs’ environmental benefits.

Current Target (EV30@2030):

• Electrify:
  • 30% private cars,
  • 40% buses,
  • 70% commercial cars,
  • 80% two/three-wheelers.

Way Forward:

• Broaden Technology Basket:
  • Support Hybrids, Plug-in Hybrids, Hydrogen Fuel Cell EVs, and Biofuels.
  • Shift to technology-neutral incentives.
• Secure Critical Mineral Supply:
  • Engage in mineral diplomacy with the Lithium Triangle (Argentina, Bolivia, Chile) and Australia.
  • Develop domestic processing and recycling.
• Prioritise Infrastructure:
  • Redirect subsidies towards charging infra and grid upgrades.
  • Use PPP models for urban and rural EV rollouts.
• Green the Grid:
  • Align EV goals with renewable energy targets (500 GW non-fossil by 2030).
  • Promote solar-wind microgrids for charging hubs.
• Protect ICE Industry:
  • Promote R&D in hybrids, low-emission ICEs, and flex-fuel vehicles.
  • Retrain workforce and strengthen supply chains during the transition.