India’s role in global automotive electrification

[This article was first published on
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Electrification has quickly emerged as one of the key
global megatrends across the industry and is a contributor to the
disruptive era in the automotive and mobility sectors.

Mature markets such as Europe and Greater China are taking
significant steps to transition their vehicles to the electric age,
and their consumer markets have responded enthusiastically. India
is slightly behind the curve compared with the e-mobility leaders
but is betting on mass-scale electric mobility.

Darshak Parikh, Senior Research Analyst – E-Mobility, IHS Markit
and Raghunandan Balasubramanian, Senior Research Analyst –
Powertrain, IHS Markit explore India’s growing electric vehicle
(EV) industry and how the country’s supplier and component
community can tap into new opportunities.

Growth projection
The production of alternative powertrain (AP)
technologies—consisting of mild hybrids, full hybrids, battery
electric vehicles (BEVs), and fuel cell electric vehicles
(FCEVs)—should increase from 15 million units in 2021 to 65
million units by 2030 globally.
During the same timeframe, the production of non-electrified
internal combustion engine (ICE)-based vehicles, including ICE
stop/start vehicles, will significantly decline from 68 million
units in 2021 to 38 million units by 2030.

The AP (alternative powertrain) industry in India is still
developing, with limited availability and affordability of
electrified vehicles. However, by 2030 one in every four vehicles
produced in India should leverage some form of alternative
propulsion, with mild hybrids forecast to hold the dominant market
share among all AP vehicles.

To fulfill the demand of electrified vehicles production, India
will require around 1.8 million electric motors and 11GWh battery
capacity by 2030, of which around 260,000 electric motors and
10.5GWh battery capacity are expected for the production of
BEVs.

Evolution of the AP component industry
AP component technologies have already reached a level of maturity
that supports mass-market adoption and large-scale production of
electrified vehicles.

For full-hybrid and battery electric vehicles, the use of
permanent magnet motors should remain widespread, owing to their
higher torque density, better efficiency, and smaller packaging
envelope. In a similar fashion, increasingly nickel-rich
chemistries for battery cells, such as NMC622 and NMC811,are likely
to be the preference of most mainstream automakers globally.

Moving forward, to support a significant increase in AP
component demand, suppliers and OEMs will have to quickly develop
components and technologies and scale up their production to keep
pace with the momentum.

We have witnessed new and interesting strategies,
collaborations, and joint ventures among component suppliers to
expand their offerings and capture the new markets as and when they
arise. A case in point is the e-axle domain where electric motor,
inverter, and transmission suppliers have increasingly joined hands
to provide integrated electric propulsion solutions.

New joint ventures and other partnerships will also enable the
constituent companies to leverage common or complementary synergies
and develop or expand into new products, services, and business
areas. Meanwhile, divestments and spin-offs allow companies to
shift more focus and capital to growth areas such as
e-mobility.

Furthermore, consolidation of business practices may also be a
prudent move from a financial perspective. Through mergers and
acquisitions, horizontal, or vertical integration, companies can
strengthen business lines and increase market share.

Finally, by obtaining government support such as exemptions,
subsidies, and schemes, companies can ease the financial burden of
establishing new businesses in emerging sectors such as this.

New opportunity areas for suppliers
The role of tier-1 and tier-2 suppliers is changing. The shift to
electrified propulsion is destined to bring major opportunities as
well as challenges for traditional OEMs, suppliers, and new
entrants. As highlighted earlier, suppliers will have to quickly
develop technology and manufacturing capabilities to support the
transition.

The Indian market for electric motors and power electronics
components is likely to witness colossal growth from 0.15 million
units in 2020 to 1.8 million units in 2030. The domestic
opportunity, along with the chance to manufacture at scale and
supply to global markets, is potentially very lucrative for tier-1
and tier-2suppliers.

In terms of the global component supply chain, electric
powertrain component manufacturing should increasingly shift within
OEMs, as they look to reduce production costs and manage
complexities, while maintaining a degree of powertrain ownership,
especially for second-generation platforms.

Even though the overall size of the EV component market is
increasing, the share of component outsourcing should diminish in
the long term as indicated in the following chart.

However, this development may put additional pressure on the
suppliers to identify new or niche markets to find additional
opportunities.

Tier-1suppliers will have to constantly innovate and develop
components related to new and upcoming technologies, competing with
other suppliers as well as in-house OEM capability to secure
business. They can also increase their product offerings by
collaborating with other tier-1suppliers to provide solutions such
as integrated power electronics and e-axles.

India versus the rest of the world
While growth in the AP (alternative powertrain) industry is on an
upward trajectory, the industry in India has much ground to cover
to realize widespread adoption. The cost-benefit analysis weighs in
favor of electrification in two- and three-wheel domains as well as
ride-sharing markets, but the same cannot be said for light
vehicles yet.

In the long term, India has the potential to establish itself as
a global research and manufacturing hub. Existing tailwinds that
may lead to this scenario are favorable FAME II policies, the
government’s production-linked incentives (PLI) for domestic
manufacturing of battery cells, as well as incentives for
establishing a domestic semiconductor industry.

Even though India lacks the necessary raw materials for the
production of major electrified powertrain components, it is among
the few territories that have the strategic advantage of the lowest
costs for battery cell-manufacturing, as well as some other
electric powertrain components.

Many state governments are also offering supply-side incentives
and capital subsidies for AP component manufacturing and assembly.
Domestically, operating OEMs and suppliers have expansion
capabilities already in place, and they can significantly upscale
manufacturing to become a larger player in both domestic and export
markets.

India’s component industry already has the right set of
resources, a well-defined supply-chain, and an in-depth
understanding of the automotive business. By leveraging these
assets and focusing on EV component development and manufacturing
as demand increases, the industry can potentially gain a strong
foothold in domestic and export markets.

To get an in-depth information on the evolving EV ecosystem,
log in to an Autocar Professional – IHS Markit webinar on ‘Supply Chain Dynamics of Electrified Powertrain
Components’, on June 15, at 2:30 p.m (IST).

Register here to
participate

Source: http://ihsmarkit.com/research-analysis/indias-role-in-global-automotive-electrification.html