Suzuki Motor Company’s investment of Rs 10,440 crore in Gujarat announced at the Indo-Japan Economic forum last month is set to give a huge boost to the state’s credentials as the destination of choice for the automobile sector. If things work as per plan, Gujarat could well make key strides in India’s emerging EV segment.
The state came into the limelight as far as the auto sector goes when it rolled out the red carpet for Tata’s No project. In the years that followed, it was able to attract the big names such as SMC’s contract manufacturing subsidiary, Ford India and MG Motor India which established itself in Gujarat by virtue of its takeover of the GM facility at Halol.
However, in the intervening year, Tamil Nadu, Karnataka, Telangana and Andhra Pradesh made great strides in the EV domain both for their focus on manufacturer-based incentives as well as consumer ones, suggests a report by Colliers and Indospace entitled “Electric Mobility in Full Gear”. But in the manufacturing arena, the stakes were not high for Gujarat.
Tamil Nadu and Maharashtra have consistently wooed the EV sector with incentives ranging from subsidies on electricity, capital investment and taxes. Tamil Nadu, for instance, provides a capital subsidy of 20 percent of the eligible investment over 20 years for EV battery manufacturing.
In its EV policy 2021, the Maharashtra says it aims to attract at least one Gigafactory for the manufacturing of Advance Chemistry Cells under the PLI scheme by 2023. In addition, EV startups are to be encouraged on a priority basis. While the state government has already signed an MoU with Causis e-mobility to set up an EV manufacturing unit, several OEMs have announced plans to foray into EV making including Bajaj Auto, and Kinetic. Auto parts companies like Pinnacle Industries have thrown their hat into the ring with a dedicated subsidiary for EVs.
Hero Electric has joined hands with Mahindra to roll out electric vehicle from Pithampur. Telangana is seeing the emergence of clusters that are drawing significant investments with the state government providing not only for startups but new entrants as well as established players. Karnataka amended the Karnataka Electric Vehicle and Energy Storage Policy, 2017, to offer subsidies and incentives to component manufacturers. Many states have prioritized land allocation for the development of EV parks as well as offered the possibility of customized incentive packages for giga-scale battery plants.
Honda Power Pack Energy India, the battery arm of the Japanese player wants to kickstart it operations through small vehicles, especially e-autorickhaws with a foray in Bengaluru as its starting point. This does not come as a surprise given that the city is so intrinsically linked to India’s EV story.
Bengaluru-based IT companies with their in the software and big data can be harnessed for both new and established players keen to make a mark for themselves. EV manufacturing is a veritable eco-system which includes component manufacturing, vehicle and assembly, cell manufacturing, electronics parts making and recycling of EVs and batteries.
Bengaluru as innovation hub
Bengaluru is home to startups such as like Sun Mobility which is in the battery swapping domain, Simple Energy and Log9Materials which makes nanotech-based batteries for e-vehicles. Just over a decade ago, India’s tryst with the electric vehicle had its origins in Bangalore with the establishment of Reva which was subsequently taken over by Mahindra. For other players such as TVS Motor, Greaves Cotton and Ola Electric that have ambitious plans to roll out electric two wheelers, the proximity to Bangalore is a plus point.
The report by Colliers and Indospace suggests that Gujarat has announced policies to incentive the use of EVs from a consumer perspective. Now with the Suzuki investment, it will be seen as a serious player in the EV manufacturing domain where states like Tamil Nadu have seen a flow of investments to set up a supportive ecosystem for EV manufacturing. With Suzuki upping the ante on EVs, Toyota with which it has an alliance and which it is slated to launch an EV by 2025 will be a part of the action.
In addition, BYD which is slated to provide the batteries may even consider setting up base here ( it has a facility in the south which rolls out MPVs that target the B2B segment) but given the recent hostilities between India and China, all stakeholders will have to tread safely. MG Motor India has said it plans to bring in external funds to set up an exclusive EV unit, and it remains to be seen if it will set base in Gujarat.
With Suzuki’s Gujarat investment plans, one can expect to see a whole lot of incentives being offered by other states to action a slice of the EV action. However, the going is not going to be easy. While companies will want to depend on reliable tier 1 and 2 players, software and logistics support as well as getting the right human resources will also matter. Getting land for EV parks as well as setting up charging infrastructure will be other challenges. The industry is in the process of transitioning to a new vehicle era, and will need the best resources available.
From the government’s point of view, new investment in an evolving ecosystem creates tens of thousands of direct and indirect jobs and bring much needed development. It is these investments that the government hopes will create not only jobs but new skillsets that will help alleviate the losses in livelihoods that were wrought by the pandemic. For the companies, it is the opportunity in this decade of EVs to create brands that can flourish both in India and overseas.