Theme : Economics , S&T
GS - 3
TABLE OF CONTENT
- Context
- Electric Vehicles
- Global Status of EVs Production & Supply Chain
- China is a Dominant Player in EVs Supply Chain
- Governmental Spending in Energy Transition
- What can India do?
Context : The start of COP27 in Egypt has renewed the world’s focus on climate change. Electric vehicles (EVs) are key in the global quest to decarbonize. In India, which also faces serious air pollution issues, the transition to EVs is critical.
Electric Vehicles :
- Electric vehicles (EV) are a part of the new normal as the global transportation sector undergoes a paradigm shift, with a clear preference towards cleaner and greener vehicles.
- The electric vehicle is a vehicle that runs on electricity alone. Such a vehicle does not contain an internal combustion engine like the other conventional vehicles. Instead, it employs an electric motor to run the wheels.
Global Status of EVs Production & Supply Chain :
- 50% of global EV’s production comes from China: EVs themselves, China has a share of around 50 per cent in global production.
- 25% from Europe: Europe is distant and stands at second position with 25 per cent.
- 10% from US: Surprisingly, the US is a small player in the EV supply chain, producing only 10 percent of vehicles and containing just 7 percent of battery production capacity.
- India’s position is still not noteworthy: India does not feature as a player of note.
China is a Dominant Player in EVs Supply Chain :
- Every part of EV concentrated in China: According to a recent report by the International Energy Association, every part of the EV supply chain is highly concentrated, mostly in China.
- High global mining output of Key minerals, specifically graphite: The first stage of the supply chain is the key minerals required for batteries, namely lithium, nickel, cobalt and graphite. In graphite, China has an 80 per cent share of global mining output.
- Chinese control over Politically unstable DRC’ Mines of cobalt: In Cobalt, the politically highly unstable Democratic Republic of Congo mines two-thirds of the global supply and Chinese companies control a big share of that country’s mining.
- China dominates the processing of ore/minerals: Globally, over 60 per cent of lithium processing, over 70 per cent of cobalt processing, 80 percent of graphite processing and about 40 percent of nickel processing takes place in China.
- China’s heavy production of cell components: Other than Japan and South Korea, China produces two-thirds of global anodes and three-fourths of cathodes.
- Same case with the battery cells: China has a 70 per cent share in the production of battery cells.
Governmental Spending in Energy Transition :
- China the biggest spender on energy transition: According to a report by Bloomberg’s New Energy Fund (NEF), in 2021, out of a total global spend of $750 billion in climate-related investments (90 percent of which went into renewable energy and electric transport), China alone spent $266 billion.
- US stands at second: The US was a distant second with $114 billion. The major countries of Europe combined would equal the US. In Europe, about 75-80 per cent of the spending is on EVs, which is why it leads the US in this sector.
- India holds 7th rank but needs a focused approach: India was in 7th place, not a bad rank to occupy with $14 billion invested. However, almost 40 percent of Chinese and US spending was on EVs, while more than 95 per cent of India’s spending is on renewable energy. In India, despite intent, EVs have not received sufficient investment.
What can India do?
- Accelerating the mechanism of acquiring overseas mines of critical minerals: A recently formed government venture, KABIL, which is a JV between three minerals and metals PSUs, is tasked with the job of identifying and acquiring overseas mines
- Liberalizing the domestic exploration policies: An alternate option is to liberalize exploration policies domestically, benchmark them with global best practices and invite global investors to find and mine in India.
- Stitching up the supply alliances: It is important to stitch up supply alliances with countries ex-China, as has been done with Australia. At higher ends of the value chain, from battery cells onwards, there is a need to invest much more in R&D.
- Making a vibrant startup ecosystem and public private partnership: A public-private partnership is vital. The vibrant startup ecosystem must be leveraged because it is more likely to be innovative than legacy firms.
FAQs :
1. What are EVs ?
Answer : Electric vehicles (EV) are a part of the new normal as the global transportation sector undergoes a paradigm shift, with a clear preference towards cleaner and greener vehicles.
2. What is the Importance of China in the EVs Supply Chain ?
Answer : According to a recent report by the International Energy Association, every part of the EV supply chain is highly concentrated, mostly in China.