China Wins Elon Musk's Favour, But India Eyes Global EV Market Share

China's dominance in EV and battery production is a pivotal factor in Tesla's ascent as the world's premier electric vehicle manufacturer. This is underscored by Tesla CEO Elon Musk, who recently emphasized the Super Power's increasing importance for his company. Despite this, India's potential for EV development remains a compelling prospect.

Just a week after delaying his visit to India, Musk prioritised China, traveling to Beijing to advocate for Full Self-Driving technology. This trip highlights China's crucial role as the world's most valuable electric vehicle maker in Tesla's global supply chain.

China is at the Forefront of Battery Production

China's influence on Tesla is far more significant than India's, primarily due to its near dominance in battery production. As a critical component for EVs, China's control over battery production is a key factor in its lion's share of global electric vehicle sales, which exceeds half the market.

According to Reuters, Musk met with Robin Zeng, chairman of CATL, the Chinese battery giant, during his recent visit to China. CATL is a powerhouse in battery production, supplying two-thirds of the global market. They're a crucial player for Tesla and other major automakers like Volkswagen and Toyota.

Tesla's Biggest Plant is in China

China has surged ahead in EV production, leaving the US and Europe in its wake. This dominance has fueled the growth of Tesla, the world's leading electric vehicle manufacturer.

Capitalising on a new Chinese policy allowing full ownership for foreign carmakers, Tesla opened its largest manufacturing unit in Shanghai in 2018. This Shanghai plant annually produces more than one million units of Tesla's Model 3 and Model Y cars.

This Shanghai Gigafactory is Tesla's first outside the US. In addition to serving the Chinese market, it acts as an export hub, supplying cars to regions like New Zealand, Australia, and Europe.

India's EV Push is in its Early Stages

While the global shift towards electric vehicles presents opportunities for new entrants, India's EV push is not without its challenges. Its historic reliance on battery imports and a fragmented domestic supply chain pose significant hurdles that need to be addressed for the country to fully embrace the EV revolution.

According to a Niti Ayog report, the demand for lithium-ion batteries (LIBs) in India is dominated by consumer electronics, with a demand of 4.5 GWh compared to only 1 GWh for electric vehicles (EVs). This translates to a ratio of 4.50 (consumer electronics: EVs).

Here's a table summarising the LIB market breakdown in India:

• Segment LIB Demand (GWh)
• Consumer Electronics - 4.5
• Electric Vehicles - 1

As the table shows, consumer electronics are the primary driver of LIB demand in India, highlighting a key challenge for the country's EV industry. To establish a robust EV ecosystem, India will need to ramp up LIB production for electric vehicles.

Fueled by surging battery demand, India aggressively pushes domestic production through its production-linked incentive (PLI) scheme for advanced chemistry cell (ACC) battery storage.

These ACCs are vital components of lithium-ion batteries. Niti Aayog, a government think tank, projects India is well-positioned for a significant slice of the burgeoning global battery market, potentially capturing up to 13 percent of global demand by 2030.

After years of policy ambiguity, India released a new EV policy last month. This marks a significant change from 2018 when Niti Aayog's then-CEO Amitabh Kant expressed concerns about regulations hindering technological advancement.

Despite China's current dominance in the EV supply chain, the increasing scrutiny of its exports from major markets like Europe and the US presents a potential opening for India. This could be a golden opportunity for India to establish itself as a key player in the global EV industry.

Musk has previously expressed concerns that trade barriers might be necessary to safeguard domestic auto industries. This stance contradicts his efforts to cultivate a positive relationship with China.