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India EV supply chain may benefit from Taiwan suppliers

With a huge population of 1.37 billion people, a high demographic dividend, and generous subsidies for electric vehicles (EV) from both the central and state governments, India is expected to increase EV penetration rate from 1% to 10% by 2025.

Taiwan's suppliers now are seizing the opportunity to upgrade India's EV supply chain.


The Indian government offers generous subsidies and tax preference

There are two reasons why India should promote its EV industry: to be less dependent on oil imports and to improve air quality. In 2020, 85% of India's oil was imported and the percentage keeps rising. Meanwhile, seven Indian cities were listed among the top-10 cities with the worst air pollutions, according to World Air Quality Report published in 2018.

Sales of EV in the 2020FY were 236,803 cars, including 143,837 secondhand electric motorcycles, 88,378 electric tricycles, and 4,588 electric four-wheeled cars and buses, according to India's Society of Manufacturers of Electric Vehicle (SMEV). The EV penetration rate was well under 1%, indicating the great potential for EV development in India.

The Indian government has laid out the FAME II scheme (Faster Adoption and Manufacturing of Hybrid and EV) that totals nearly INR100 billion (US$ 1.4 billion) to subsidize EVs and car-charging infrastructures from April 2019 to March 2022. Subsidies for EVs amount to INR86 billion and charging infrastructures to INR10 billion.

Buses and tricycles are the most used transportation in India, so 41.2% of the INR86 billion go to electric buses, 29.1% go to electric tricycles, and 23.3% go to electric scooters and motorcycles. The subsidy is available for 1 million vehicles maximum and targets those providing ride-hailing services such as commuting and goods delivery.

Subsidies for charging infrastructures are available for cities that are apt to build such facilities, have high vehicle density, and suffer serious air pollution. Battery swapping and charging stations affiliated with small shops are also increasing due to the fact that Indians are more accustomed to riding two- or three-wheelers than cars.

State governments have proposed tax exemptions and subsidies on EV purchases as well. They have attracted not only more customers but also more EV makers to build factories. From land, capitals to labor and tax, the state governments, especially in Southern India, provide a wide range of incentives.


India wants to build a local EV supply chain

Digital electronics and software are two key elements of an EV. Combining Taiwan's specialty of electronics with India's software capability can bring changes and upgrades to India's EV supply chain.

India's EV supply chain lacks the energy system, including battery cell, power swapping, and smart charging; the power system, including a high-power motor and motor controller, and the Internet of Things (IoT). In India, low-cost NB-IoT without a high monthly fee is more popular among local drivers.

Taiwanese suppliers are already supplying these three systems. There are Gogoro's battery swapping; Delta Electronics, Fukuta Motor, TECO, and Chroma Corporation's car power systems; and Sercomm Corporation and Gemtek's NB-IoT modules.

These technologies are needed for India to raise local production of EVs, and Taiwanese suppliers happen to have these advantages.

According to India's largest motorcycle maker HeroMoto Corp, a secondhand electric scooter usually costs around INR30,000-70,000. Better ones cost about INR70,000-90,000. Given that in 2020, India's average income level was about US$2,080, the pricing of EV needs to be equivalent to or even lower than an ICE car. Otherwise, there's no incentive.


Taiwan can provide what India needs

Taiwanese suppliers can supply what India needs to build its local EV supply chain.

According to SMEV, where government policies work smoothly, infrastructures to be widely built, and the supply chain to gradually localize, the penetration rate of electric scooters and tricycles could rise to 12% and 30% by 2025.