U.S. President Joe Biden
| Photo Credit: Reuters

U.S. President Joe Biden on Tuesday unveiled a bundle of steep tariff increases on an array of Chinese imports including electric vehicles, computer chips and medical products, risking an election-year standoff with Beijing in a bid to woo voters who give his economic policies low marks.

Mr. Biden will keep tariffs put in place by his Republican predecessor Donald Trump while ratcheting up others, the White House said in a statement citing “unacceptable risks” to U.S. “economic security” posed by what it considers unfair Chinese practices that are flooding global markets with cheap goods.

The new measures impact $18 billion in Chinese imported goods including steel and aluminum, semiconductors, batteries, critical minerals, solar cells and cranes, the White House said. The announcement confirmed earlier Reuters reporting.

The United States imported $427 billion in goods from China in 2023 and exported $148 billion to the world’s No. 2 economy, according to the U.S. Census Bureau, a trade gap that has persisted for decades and become an ever more sensitive subject in Washington.

“China’s using the same playbook it has before to power its own growth at the expense of others by continuing to invest, despite excess Chinese capacity and flooding global markets with exports that are underpriced due to unfair practices,” White House National Economic Adviser Lael Brainard told reporters on a conference call.

Even as Mr. Biden’s steps fell in line with Mr. Trump’s premise that tougher trade measures are warranted, the Democrat took aim at his opponent in November’s election.

The White House said Mr. Trump’s 2020 trade deal with China did not increase American exports or boost American manufacturing jobs, and it said the 10% across-the-board tariffs on goods from all points of origin that Mr. Trump has proposed would frustrate U.S. allies and raise prices. Mr. Trump has floated tariffs of 60% or higher on all Chinese goods.

Administration officials said their measures are “carefully targeted,” combined with domestic investment, plotted with close allies and unlikely to worsen a bout of inflation that has already angered U.S. voters and imperiled Mr. Biden’s re-election bid. They also downplayed the risk of retaliation from Beijing.

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Mr. Biden has struggled to convince voters of the efficacy of his economic policies despite a backdrop of low unemployment and above-trend economic growth. A Reuters/Ipsos poll last month showed Mr. Trump had a 7 percentage-point edge over Mr. Biden on the economy.

Free trade no more

Analysts have warned that a trade tiff could raise costs for EVs overall, hurting Mr. Biden’s climate goals and his aim to create manufacturing jobs.

Mr. Biden has said he wants to win this era of competition with China but not to launch a trade war that could hurt the mutually dependent economies. He has worked in recent months to ease tensions in one-on-one talks with Chinese President Xi Jinping.

Both 2024 U.S. presidential candidates have sharply departed from the free-trade consensus that once reigned in Washington, a period capped by China’s joining the World Trade Organization in 2001.

China has said the tariffs are counterproductive and risk inflaming tensions. Mr. Trump’s broader imposition of tariffs during his 2017-2021 presidency kicked off a tariff war with China.

As part of the long-awaited tariff update, Mr. Biden will increase tariffs this year under Section 301 of the Trade Act of 1974 from 25% to 100% on EVs, from 7.5% to 25% on lithium-ion EV batteries and other battery parts and from 25% to 50% on photovoltaic cells used to make solar panels. “Certain” critical minerals will have their tariffs raised from nothing to 25%.

The tariffs on ship-to-shore cranes will rise to 25% from zero, those on syringes and needles will rise to 50% from nothing now and some personal protective equipment (PPE) used in medical facilities will rise to 25% from as little as 0% now. Shortages in PPE made largely in China hampered the United States’ COVID-19 response.

More tariffs will follow in 2025 and 2026 on semiconductors, whose tariff rate will double to 50%, as well as lithium-ion batteries that are not used in elective vehicles, graphite and permanent magnets as well as rubber medical and surgical gloves.

A step Mr. Biden previously announced to raise tariffs on some steel and aluminum products will take effect this year, the White House said.

A number of lawmakers have called for massive hikes on Chinese vehicle tariffs. There are relatively few Chinese-made light-duty vehicles being imported now. Senate Banking Committee Chairman Sherrod Brown wants the Biden administration to ban Chinese EVs outright, over concerns they pose risks to Americans’ personal data.

India’s Finance Minister announced a new scheme to develop deep tech for defence purposes while presenting the Interim Budget for 2024-25.
| Photo Credit: SHIV KUMAR PUSHPAKAR

For tech-savvy youth, a corpus of ₹1 lakh crore will be established with 50-year interest free loans for providing long term financing or refinancing with long tenures and low or nil interest rates, announced Finance Minister Nirmala Sitharaman while presenting the Interim Budget for 2024-25.

“This will encourage the private sector to scale up research and innovation significantly in the sunrise domains,” she added.

The Finance Minister also said that a new scheme will be launched to develop deep tech for defence purposes.

On electric vehicles, she informed Parliament that government will expand and strengthen the sector through greater manufacturing and charging infrastructure.

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The government has allocated ₹1,500 crore for setting up semiconductor fabs in India under the Modified Scheme, she said.

Counting the achievements of Union Government, the FM said that the Skill India Mission has trained 1.4 crore youth, upskilled and reskilled 54 lakh youth. She added that 3,000 new Industrial Training Institutes (ITIs) were opened.

Nirmala Sitharaman informed that in the last ten years 7 Indian Institutes of Technology (IIT), 16 Indian Institutes of Information Technology (IIIT), 7 Indian Institutes of Management (IIM), 15 All India Institute of Medical Sciences (AIIMS) and 390 Universities have been set up in the country.

She briefed that ₹34 lakh crore worth of Direct Benefit Transfer (DBT) has been achieved in the last decade, and it saved ₹2.7 lakh crore of government as a result.

More than 1360 Agricultural Produce Marketing Committees (mandis) have been digitised, doing a business of 3 lakh crore, she told.

FM informed the house that Digital Public Infrastructure (DPI) has been instrumental in formalisation of the economy.

“Technological advancements are transforming lives and businesses, creating new economic opportunities,” she said.

Tackling risk: As traditional internal combustion engine manufacturers transition to EVs, a significant share of MSMEs could be at risk of losing business. Image for representation only
| Photo Credit: KVS Giri

Tamil Nadu is gearing up to be a global electric vehicle (EV) manufacturing hub, with the government seeking to attract ₹50,000 crore in investments and envisioning 1.5 lakh new jobs in the EV sector in the next five years. Investments worth almost ₹40,000 crore is already underway, and as per recent data, Tamil Nadu is one of the largest EV manufacturing states in India, producing more than 40% of all registered EVs and 46% of electric two-wheelers.

Yet, Micro, Small, and Medium Enterprises (MSMEs) hold the key to unlocking the potential of these investments and future growth.

MSMEs are Backbone of TN’s Economy  

Contributing significantly to the State’s as well as the country’s GDP, MSMEs are financially vulnerable, dependent on fossil-based energy, and in need of significant technological upgradation and efficiency improvements. Tamil Nadu manufactures 35% of India’s automotive components – a sector that is largely driven by MSMEs and contributes to 8% of the State’s GDP. Not only does this make MSMEs the backbone of the State’s economy but also crucial in the growth of Tamil Nadu’s emerging EV industry.

Most EV components are currently imported but the EV component market is projected to grow at a CAGR of 22% until the end of the decade. This presents MSMEs with a huge opportunity as EV manufacturers are keen to localise their component base to bring greater flexibility, customisation and quality control while reducing costs, import dependence, and potential supply chain disruptions (as experienced during Covid). It also means significant new investments and manufacturing capabilities can be built in newer components such as motors and controllers, battery management systems, chargers and charging stations, amongst others. From the State’s perspective, EV-ready MSMEs have the potential to create new and greener jobs, especially for women in a sector that has traditionally been male dominated. 

However, a transition to EVs will also need to ensure that existing Internal Combustion Engine (ICE) component manufacturers, especially those at the risk of losing business as certain components become obsolete, are able to diversify to EV component manufacturing or allied sectors.

Therefore, building MSME capabilities and sustenance needs to be in sync with the investments being made by auto companies to support Tamil Nadu’s transformation to a global EV manufacturing hub.

Upskilling and Just Transitions

Building future-ready MSME’s would require skilling and upskilling: as traditional ICE component manufacturers transition to EVs, a significant share of MSMEs and their workforce could be at risk of losing business and livelihoods. To ensure a just transition, such businesses will need awareness on evolving market trends and opportunities in EV component manufacturing. Additionally, they will need hand-holding and support with go-to-market strategies, innovative and hands-on skilling programs catering to existing workforce – both white and blue collar, and incentives to undertake skilling of workers.

Upgrading Curriculum in Technical Institutes

This needs to be complemented with upgradation of curriculum in technical institutes, providing short-term trainings and apprenticeships for fresh graduates, including women, to create a green workforce for the future. Moreover, as a new and evolving sector, manufacturing EV components will also need significant investments in R&D, testing centres, and common facility centres to support design and innovation as well as to ensure high standards of quality. Tamil Nadu has taken a lead in this direction through its decision to establish E-mobility centres in state-owned polytechnic colleges, initiating redesign of curriculum and establishing common facility centres to meet the burgeoning EV industry requirements.

Decarbonising MSMEs

MSMEs will also need to become greener over time as global and Indian auto brands undertake climate targets requiring suppliers, mostly MSMEs, to report and manage their carbon emissions and energy use. Staying competitive in an increasingly decarbonising world will require MSMEs to undertake interventions to manage their environmental impact by understanding their emissions sources and reduction options. Such actions have the potential to bring in efficiencies and reduce operating costs. While MSMEs currently lack the capacity to undertake such initiatives, significant awareness building, trainings and concessional finance will enhance their ability to undertake climate action and stay competitive.

Becoming Climate Resilient

Climate-related extreme events such as heatwaves and floods are already impacting life, livelihoods and productivity in India. International Labour Organisation’s 2019 report suggests that by 2030 India may account for 34 million of the projected 80 million global job losses from heat stress-associated productivity decline. To ensure that Tamil Nadu’s MSMEs are better equipped to manage these challenges, it is important to understand their current and future climate vulnerabilities. Sharing knowledge about such impacts, and the institutional and individual actions needed to build resilience and safeguard health and business, will greatly aid MSMEs towards a resilient future.

Tamil Nadu’s updated EV policy outlines a range of measures to enhance skilling, finance and manufacturing capabilities of MSMEs. Private and non-profit-led initiatives must support the state in operationalizing such policies in ways that address current and future needs of MSMEs. With a thriving and future-ready MSME sector coupled with a skilled workforce, Tamil Nadu can demonstrate how becoming a global EV manufacturing hub can be achieved while ensuring a just and inclusive transition.

(Ashwini Hingne is Associate Program Director at WRI India. Views are the author’s own)

Wang Chuanfu, the founder of Chinese automaker BYD, has become a big name in the automobile industry. BYD is quickly gaining on Elon Musk’s Tesla in the electric vehicle (EV) space to be the number 1. But now, a report in The Wall Street Journal (WSJ) has said that Mr Wang drank a glass full of battery fluid to impress a member of investor Warren Buffet’s team, who had reached Shenzhen to check if the company is worth investing in.

BYD – short for ‘Build Your Dreams’ – first launched as a battery maker in the 1995 but in 2003, pivoted from being the world’s largest manufacturer of rechargeable mobile phone batteries to the automotive sector.

The company is now on track to beat Tesla in terms of vehicle sales, as per Financial Times (FT). In July, Forbes even reported that BYD’s stock jumped 90 per cent despite the ongoing Covid-19 cases in the country as he raked in US $7 billion. His personal wealth is valued at over US $25 billion, which makes him currently the 22nd richest person in China, per FT.

In the automobile business, he replicated the way he made batteries to keep costs down. Mr Wang’s business model attracted the attention of Mr Buffet and in 2008, he sent one of his aides David Sokol to Shenzhen to check out BYD.

Mr Wang saw an opportunity to expand to other markets, like the US, and took the visitor through his factories.

At one point during the tour, while trying to impress Mr Sokol about how BYD’s batteries were safe for environment, poured himself a glass of battery fluid and took a sip, the WSJ said in its report.

The mixture did not taste good and the US businessman declined the offer to try it.

In September that year, Mr Buffet-owned Berkshire Hathaway bought a 10 per cent stake in BYD for $232 million via its energy unit.

Mr Wang, born in 1966 in Anhui province, was raised by older siblings after both his parents died.

The number of electric vehicles in India has surged from just 2,400 a decade ago to over 27.4 lakh as of July 2023. File.
| Photo Credit: Ashoke Chakrabarty

The number of electric vehicles in India has surged from just 2,400 a decade ago to over 27.4 lakh as of July 2023. However, given the concurrent rise in the number of non-electric vehicles, the overall share of electric vehicles has still not crossed the 1% mark. Notably, there is also a wide inter-State disparity in the penetration of electric vehicles.

There has also been a dramatic shift in the class of electric vehicles over time. In the initial years, between FY2015 and FY2020, when the number of electric vehicles was growing at a relatively slow pace, the share of e-rickshaws in the mix was much higher than the share of electric bikes. However, in the last four fiscal years, as the absolute number of electric vehicles has increased at a quicker pace, the share of electric bikes has surged and surpassed the share of e-rickshaws.

Chart 1 | The chart shows the cumulative number of electric vehicles in India over time.

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As of July 14, 2023, India had 0.27 crore electric vehicles, 5 crore diesel vehicles, and 28 crore petrol vehicles. The share of electric vehicles was just 0.79%, with petrol vehicles forming over 80% and diesel motors contributing about 14.5%. The share of petrol/CNG hybrid (1.4%) was also higher than the share of electric vehicles, while with a 0.6% share, the petrol/LPG variant came close.

Chart 2 | The chart shows electric vehicles as a share of all vehicles registered in a State as of July 14, 2023.

Assam ranked first with a share of 2.2% electric vehicles, followed by Tripura (about 2%). Delhi, Bihar, Uttarakhand, Uttar Pradesh, and Goa had a share of over 1%. Among the major States, Himachal Pradesh had the lowest share with 0.11%, followed by Punjab (0.26%), Andhra Pradesh (0.40%), West Bengal (0.44%), and Madhya Pradesh (0.47%).

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Chart 3 | The chart shows the share of various types of electric vehicles over time.

In FY16, the share of e-rickshaws in total electric vehicles was 92% with other types such as two-wheelers, three-wheelers (other than e-rickshaws), and four-wheelers forming the rest of the 8%. Notably, an overwhelming number of e-rickshaws were used to carry passengers, while a few had carts for carrying goods or garbage.

Till FY20, there was no dramatic change in the share with e-rickshaws dominating with a market share of 82%. But the share of two-wheelers had started to rise by then. After FY20, the share of two-wheelers saw a drastic rise and peaked at about 60% in FY23, while the share of e-rickshaws came down to 32%. The latest financial year saw a small drop in the share of two-wheelers with the share of electric four-wheelers expanding beyond 5% for the first time. The share of electric three-wheelers other than e-rickshaws has remained below 5%.

Chart 4 | The chart shows the State-wise number of electric vehicles which are not e-rickshaws on the vertical axis.

The share of non-e-rickshaws among all electric vehicles is depicted on the horizontal axis. The size of the bubbles corresponds to the total number of electric vehicles. All figures are as of July 14, 2023.

The shift in the mix of electric vehicles in India from e-rickshaws to two-wheelers was led by Maharashtra, Karnataka, Tamil Nadu, Gujarat, Kerala, and Rajasthan. These States have a relatively high number of electric vehicles. The majority of these are not e-rickshaws, but two-wheelers.

On the other hand, in Uttar Pradesh, Bihar and Assam, e-rickshaws continue to dominate the share of electric vehicles. Therefore, these States do not contribute much to the shift.

vignesh.r@thehindu.co.in

Source: Vahan Sewa Dashboard, Centre for Energy Finance’s Electric Mobility Dashboard

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