Pandemic Hits EV Industry Badly
Supply-chain challenges continues but the decline in oil prices is also making the matter worse
Photo Credit : Shutterstock
The pandemic of corona virus has had the worst impact on the budding Electric Vehicle (EV) manufacturers in India as the key components including battery and other parts were largely dependent on the supply chains in China and East Asian countries.
While the Lithium-ion battery packs are manufactured in-house, the cells were directly imported from large Chinese and Korean suppliers such as CATL, Samsung HDI and LG Chem. With lock down resulting in resource crunch, the Indian EV manufacturers are in a fix. Maxson Lewis, MD of Magenta Power says “The concept of supply shock has set in driven not only by the manufacturing close down in China but also the collapse of the supply chain globally, from the ore to the final product.
As per reports, the cell manufacturing in China has started once again but the forward logistics (shipping) is now an issue which will take another month to open out. This is undoubtedly an acute concern for Indian-manufacturers as there has been a major push towards electrification. Tarun Mehta, Co-founder and CEO of Ather Energy says, “For a lot of OEMs the supply will be severely affected for the next few months, especially those that are dependent on international partners. Ather has a strong local supplier base for nearly 90% of the product being indigenously built and sourced but even we expect to see some delays ahead.”
In the Wake of the COVID-19 Pandemic Indian Finance Minister deferred the filing of GST, this was welcomed by a lot of EV manufacturers “We want to thank the honorable finance minister for announcing the relaxation in GST returns & composition returns filing. It provides a big relief to the EV industry, which is currently facing several other challenges. – Sohinder Gill Director General, Society of Manufacturers of Electric Vehicles (SMEV)
Impact of Falling Oil Prices
Buyers may become less willing to embark on the electrification ship given the higher price point of EVs, especially as oil prices are now declining. The longer the coronavirus prevails, the more it will inevitably disrupt EV-battery supply too, experts say. “The supply shock will put out the EV plans and hence large scale investments in this space will be delayed. But this could also be the inflection point for EV from a long term perspective. Auto industries can choose to look at the traditional way of re-building their manufacturing capacities and get back to pushing the ICE engines,” says Maxson Lewis.
If any short-term dips in productivity cannot be recovered quickly, companies could delay investments because of their uncertainty about the future and might ultimately lead to laying off workers, which in turn would affect consumer confidence and expenditure thereby negatively affecting both new-car sales as well as the sales in the used-car transactions.