At the dawn of 2020, India seems
to be on a trajectory to switch to electric vehicles for mobility. Unarguably, mobility
both intra city and inter-city pose huge challenges for policy makers.
For centuries, mobility was
essentially a function of the speed of human legs and animals. Machine power
touched mobility solutions only in the last two centuries or so. Horse drawn
trams were all over New York even 120 years ago till the car took over. The IC
engine transfigured the mobility across the world. Personal mobility as
distinct from public travel got a new spur. Fascinatingly, the early cars were
more electric than fuel based. Large scale discoveries of oil in the Gulf at
the dawn of the 20th century in addition to the reserves in the US
led to an era of cheap fuel. Private ownership of cars began to increase, US in
particular. Increased competition supplemented by innovation and price drops
enabled the virtuous cycle in automobile industry.
Distinctive to car as theme of
urban transport in US and in general extended to rest of the world was the
availability of fuel. India with its import substitution policy and top-down
induced so called moral virtue of shunning conspicuous consumption put brakes
on supply of cars for pretty long time. It is not that Indians did not want to
own cars (controlling for income) but the supply side constraints were high
relative to demand. The upshot was the presence of latent demand translating
into actual sales post 1991 liberalization phenomenon.
The post 1991 phenomenon not only
saw an increase in car sales but also in sales of two wheelers. Their role in
social empowerment and economic development are quite understated. There was
also a corollary. The vehicles required fuel and it meant India has to import
fuel to keep automobile revolution running. India is short of oil and hence has
to meet its demand from external sources, Persian Gulf in particular.
It led to few consequences. One,
there is continued trade imbalances skewed towards imports. Implied, we often
run a trade deficit. Two, given the sources of oil in the Gulf and the
equations with those countries and geopolitical linkages to oil conundrum,
means there is volatility in oil prices frequently and India will have to find
itself at the generosities of oil producers. Given the relative monopoly nature
of OPEC, and every increasing need of oil, Indian geopolitics often is
potential hostage to semantics of oil supply and demand. Our internal and
external policies independent of oil politics necessitate our reduction in
dependence on oil as critical fuel. There is no substitute as such to oil in
the immediate run. Hence a focus to switch to electric vehicles. A similar
switch is already on in the railways segment where diesel electrics are being
replaced by overhead electrics. As Energy internet gathers pace and energy
storage progresses into next stage of its lifecycle, India may well lead the
field in building and distribution capacities. It might herald significant push
to India’s place in automobile value chain.
Furthermore, IC vehicles tend to
be polluting and given the current trends to move to eco-friendly systems, it
is being perceived right or wrong that electric vehicle are less polluting.
There is some merit in the argument since electric vehicle eliminate virtually
all the air pollution generated by IC vehicles.
Yet, cost benefit analysis does
not suggest electric vehicle to be a significant panacea to the problems
arising of mobility related environmental and geopolitical hazards. Electric
vehicles need batteries to power them. Instead of hydrocarbon fuels, it is the
batteries run on lithium or cobalt that become critical ingredients. Batteries
represent the last puzzle in the power storage. Large scale batteries able to
store power could light up cities and regions thus saving lot of electricity
that gets wasted or unused in the network. These batteries as noted above run
on lithium and/or cobalt. Tesla is trying to experiment with Nickel but these
are early days. Hydrogen batteries too are emerging on the horizon and one is
not discounting hybrids in varying degrees that seem to fill the gap in the
transition period.
Like oil, lithium and cobalt too
are finite reserves. Incidentally, peak lithium and peak cobalt or for that
matter peak nickel might be reached faster than peak oil or peak gas. Large
reserves of lithium are found in Chile, Australia, Argentina, Bolivia, China
etc. Cobalt reserves are predominant in Congo, Bolivia, and Australia etc.
Lithium and cobalt technology have been powered basically in China which is the
largest manufacturer and user of electric vehicles. Incidentally, some accounts
suggest China is shifting away from lithium and cobalt based vehicles for
domestic demand and essentially using these vehicles for exports to the rest of
the world. There are two arguments for it. First, most lithium and cobalt mines
are apparently owned by Chinese miners. There are estimates that nearly 60% of
these mines might be in Chinese hands. Given the network externalities in fuel
adoption, mass usage of lithium and cobalt might drive away alternative fuel
based electric vehicles. This would be perfect scenario for China to lock in
their prospective customers. Given the geopolitical ambitions of China, this
potentially has the magnitude to undertake a shift in global power calculus. To
India, it virtually might end up in a scenario wherein a lock-in with the Gulf
be replaced by lock-in with China. Handing they keys of our mobility solutions
to our biggest enemy might end up in stupid geopolitics. The alternative is
India increasing its presence in the lithium and cobalt mining. There were
reports of some mutual interest in Bolivia. However, the uncertainties in
Bolivia might be dampener to the same. Moreover, India was extremely late in
the race. Unless India ups the ante and is not averse to using any political or
extra-political means to control the upstream mines, there remains a
prospective hostage situation.
India is essentially betting on
Make in India card. It entails the battery manufacturing base shifts to India
in substantial proportions. Lithium or cobalt might be raw materials but the
downstream applications might happen in India thereby potentially neutralising
the China card if any. If this were to be the objective, the need has to move
into India as base for batteries of all kinds including hydrogen etc. and not
just current lithium based ones.
There is environmental angle too.
Both lithium and cobalt are polluting element. They are not air polluters but
disposition technologies that exist today potentially create lot of groundwater
pollution. The impact of toxicity of lithium on public health is yet to be
tested and validated. Mining conditions too are poor and raise human rights
issues with the same.
By all accounts, it seems EVs in
the immediate future are unlikely to penetrate more than 15-20% in the best
case scenario in urban mobility space. There does not seem to be major visible
benefits in terms of pollution control just a likely shift from air based to
water and ground based pollution. The geopolitical hazard has to be tested
against the marginal benefits generated by the adoption.
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