Electric cars and scooters can become expensive, China did something that made companies lose their sleep
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Electric Vehicle Price Hike: China’s reduction in tax exemptions will have the deepest impact on companies that depend on Chinese giants like BYD and CATL for their battery supplies. This will increase the price of batteries and make EVs expensive in India.
Most of the two-wheeler manufacturers in India are still dependent on China for ‘cells’.New Delhi. The prices of electric vehicles may increase in India in the coming time. This will happen due to the reduction in export tax rebate given by China on lithium-ion batteries. According to a Mint report, China has decided to reduce the export tax rebate on its lithium-ion batteries from 9% to 6%. This decision will be effective from April 1. What is even more worrying is that China is planning to completely eliminate this incentive within the next year. This decision will increase the cost of batteries used in EV vehicles.
Battery accounts for more than one-third (33%) of the total manufacturing cost of any electric vehicle, so reduction in export rebate directly means increase in battery prices. This decision has come when lithium prices are already increasing in the international market. Increase in the price of batteries will put double pressure on the margins of Indian EV companies.
Which companies will be affected the most?
This decision of China will have the deepest impact on those companies which are dependent on Chinese giants like BYD and CATL for their battery supplies. Major players in the Indian market such as Tata Motors and MG Motor India, which import battery packs or cells from China on a large scale for their passenger electric vehicles, will have to re-manage their production costs.
Electric two-wheeler companies like Ola Electric, Ather Energy and TVS Motors are also expected to be affected. Most of the two-wheeler manufacturers in India are still dependent on China for ‘cells’. For companies that do not have long-term fixed-price contracts and source batteries through ‘short-term sourcing’, prices could rise overnight.
Effect can be seen in two weeks
A senior official of a company said that the effect of this tax cut will be visible in the Indian market within the next two weeks. Companies will try to accumulate their inventory quickly before the tax rebate completely reduces so that they can operate at the old prices for some time. However, in the long run this additional cost is going to fall on the customers’ pockets. If batteries become expensive, EV prices will increase.
