Business & Economy

'Chain Reaction': US Tariffs on Chinese EV Imports Create Major Dilemma for India

© AFP 2023 PETER PARKSBrian Gu, co-president of Xpeng Inc. has his photo taken next to a Xpeng G6 and X9 electric cars in Hong Kong on May 17, 2024 during the launch of Xpeng vehicles into the city for the first time. (Photo by Peter PARKS / AFP)
Brian Gu, co-president of Xpeng Inc. has his photo taken next to a Xpeng G6 and X9 electric cars in Hong Kong on May 17, 2024 during the launch of Xpeng vehicles into the city for the first time. (Photo by Peter PARKS / AFP) - Sputnik India, 1920, 30.05.2024
There are concerns in India that the US tariffs on Chinese electronic vehicles (EVs) and batteries among others could affect the Indian auto industry.
US tariffs on Chinese electric vehicles (EVs), batteries, and battery components could result in growing imports on the Indian market, an EV expert has said.
The tariff barriers on Chinese EV and battery imports, which take effect in August, would lead to a surge in imports by India, Sachin Bhise, Principal Consultant for S/4Hana Utilities at tech giant Infosys, told Sputnik India.

"The Indian industry doesn't have any other option at present. The Chinese EVs and battery spares have the advantage of cost and quality", Bhise claimed.

The analyst stressed that almost every Indian EV manufacturer in the two, three and four-wheeler category relies on China for sourcing critical components of the battery supply chain, including lithium-ion batteries.
Bhise stressed that China dominates the world in manufacturing two-wheeler EVs, batteries and spares, adding that Chinese battery supply chain imports are absolutely critical for the Indian industry.
He suggested that although India discovered large lithium deposits in Jammu and Kashmir last year, it remains likely that the minerals will have to be "processed" in China before being imported back into the country.

"Maintaining the battery value chain would make it impractical for India to adopt a confrontational stance towards China like the US has done", the expert noted.

US Tariffs on China to Have 'Chain Reaction': Ex-Envoy

According to a statement by the White House on 14 May, the US will hike tariffs on EVs from 25 percent to 100 percent, on lithium-ion batteries from 7.5 percent to 25 percent and from 7.5 percent to 25 percent for battery parts.
Former Indian Ambassador Anil Trigunayat told Sputnik India that the US tariffs on Chinese imports risk creating a "chain reaction" across the world.

"The Sino-US trade war has its own geo-economic dynamic. The US is trying to leverage Chinese manufacturing advantage, but it might have its own chain reaction whose impact is yet to be felt," underlined Trigunayat, who previously served as an envoy to Jordan, Libya, and Malta.

The former diplomat cautioned that the tendency to impose sanctions and tariffs, which have become standard tools of protection, would "further undermine the liberal trading order and impact supply chains".

India's Concerns About China's EV Dominance

In the wake of the US tariffs, a report by Indian think tank Global Trade Research Initiative (GTRI) this month forecast that every third EV on the country's roads in the coming years would be made by Chinese firms in India, either individually or through joint ventures with the country's companies.
The prediction of increased reliance on China's EV imports also comes at a time when the Indian government has been seeking to reduce its import reliance on the country's northern neighbour as part of a broader global de-risking strategy and due to "national security" concerns over the four-year long military standoff in eastern Ladakh region.
In 2023-24, two-sided trade stood at $118.4 billion, making China India's biggest trading partner, according to GTRI data.

India's Ambitions to Become Global EV Giant

India is one of the most rapidly-growing EV markets in the world, with EV sales projected to constitute over 40 percent of overall auto sales in India by 2030.
In terms of segmentation, over 90 percent of EVs in the Indian market comprises two-wheelers, with others making up the remaining 10 percent market, according to the Society of Manufacturers of Electric Vehicles (SMEV), an industry association.
The government has announced production linked incentives to the tune of $1.3 billion to for foreign and domestic auto companies to encourage investments.
Under a new federal EV policy announced in March, New Delhi does not place "restrictions" on vehicle imports from any country, including China.
India has also been looking to develop alternative supply chains in areas of critical minerals and batteries, both of which are important for EV manufacturing.
Electric vehicle - Sputnik India, 1920, 01.07.2023
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