Opinion | India's Electric Vehicle Imports: German Cars with Chinese Characteristics

India's ambitious push for electric vehicles (EVs) to combat pollution and reduce fossil fuel dependence may inadvertently lead to a large-scale entry of Chinese firms into the domestic market. A Global Trade Research Initiative (GTRI) report warns that China's automotive industry, buoyed by substantial state support, has rapidly advanced in EV technology, making it a leading exporter of EVs and related components. In 2022-23, India's auto component imports stood at $20.3 billion, with 30 per cent originating from China.

As EVs gain greater focus in the country, this dependence on Chinese imports may further increase due to China's dominant position in the global EV supply chain. GTRI’s report projects that in the coming years, every third electric vehicle and many passenger and commercial vehicles on Indian roads could be manufactured by Chinese firms, either independently or through joint ventures with Indian companies. 

While India has seen a surge in EV imports, mainly from Germany, a closer look reveals a concerning trend - a significant portion of these imports may inadvertently increase India's dependence on China.

Several prominent German automotive brands producing EVs are now under Chinese ownership or have substantial Chinese investments, meaning that even when India imports EVs from Germany, a notable part of the value chain is likely controlled by Chinese entities.

This hidden reliance on China, compounded by the lack of a dedicated Harmonized System (HS) code in India to track EV imports and exports accurately, raises important questions about the long-term sustainability and strategic implications of India's EV strategy.

Germany has emerged as a leading exporter of electric vehicles (EVs) to India in recent years. An analysis of German EV exports to India during the fiscal years 2021-22 and 2022-23 revealed that 84 per cent of the total imported EVs from Germany were of German origin, while approximately 14 per cent originated in Belgium but were routed through Germany.

This seemingly straightforward trade relationship between India and Germany in the EV sector is, however, complicated by the growing Chinese presence in the European automotive industry. Several prominent German automotive brands, including those producing EVs, are now under Chinese ownership or have significant Chinese investments.

Companies such as Volvo, owned by Geely since 2010, and MG, owned by SAIC Motor Corporation, are examples of this trend. Consequently, even when India imports EVs from Germany, a substantial portion of the value chain may be controlled by Chinese entities. The increasing market share of Chinese brands in Germany's EV market further highlights this complex dynamic. While China-headquartered manufacturers account for only about 3 per cent of all new passenger car registrations in Germany, their market share in the battery electric vehicles (BEV) segment is already at 8 per cent. 

In 2023, nearly one-fifth of all BEVs sold in the European Union were Manufactured in China, and this figure is projected to reach a quarter by 2024. Chinese automakers have made substantial inroads into Europe through strategic investments, acquisitions, and partnerships with established European brands.

Geely's acquisition of a significant stake in Mercedes-Benz parent company Daimler in 2018 was just the beginning of this trend. As of 2024, Chinese EV manufacturers have established a strong presence across Europe. BYD, China's largest automaker, has set up an extensive network of 230 dealerships spanning 19 European countries and is set to commence production at its Hungary plant within the next three years.

SAIC's MG brand is on track to sell 300,000 vehicles in Europe this year, a 40 per cent increase from 2023. Volvo, now owned by Geely, is producing record numbers of vehicles, with a significant portion being manufactured in its three Chinese factories. Moreover, Chinese automakers are expanding their reach through strategic partnerships and investments. In October 2023, Stellantis invested $1.7 billion to acquire a 20 per cent share in Leapmotor, agreeing that vehicles sold outside of China are to carry a Stellantis brand.

Volkswagen and Audi are likely to follow a similar approach, with Volkswagen investing $700 million for a minority stake in Xpeng, a promising EV startup already selling in several European markets. Jaguar Land Rover plans to revive the Freelander as a Made-in-China EV using Chery's EV platform, further highlighting the growing integration of Chinese players in the European market. 

In conclusion, India's current trade data classification system, which relies on the 8-digit Harmonized System (HS), needs more specificity to track and analyse the rapidly growing electric vehicle sector effectively. The absence of a dedicated HS code for EVs means that trade data is primarily captured under the broad category of "Other vehicles, with only electric motor for propulsion: Motor cars" (HS code 87038030). This generalised classification fails to provide the granular insights needed to monitor the specific dynamics of the EV market, hampering targeted policy decisions and strategic planning. To avoid a scenario like Germany, where the hidden Chinese influence in EV imports remained obscured until it was too late, India must prioritise introducing a new, dedicated 8-digit HS code for electric vehicles. This would enable precise data collection, facilitating a clearer understanding of import and export trends, market share, and the overall growth trajectory of the EV sector. By implementing a robust tracking mechanism with a specific HS code for EVs, policymakers, industry stakeholders, and researchers can make informed decisions, foster the development of a self-reliant domestic EV ecosystem, and navigate the complexities of the global EV supply chain more effectively.

(The writer is a Research Analyst of China Desk at The Takshashila Institution. Views expressed are personal.)