Can commerce and a military standoff coexist with China?

At a time when India-China relations are tense due to an ongoing military standoff in the Ladakh sector since China's incursions there in April 2020, it is difficult to explain the government's soft policy of allowing Chinese electric vehicles and steel imports into India when it has consistently rejected Islamabad's proposals for trade with India, claiming that “terrorism and trade cannot go together”.

The good news is that India's demand for electric vehicles (EVs) is expected to skyrocket in the coming years. That might also be the unfortunate news. In order to increase EV sales from a pitiful 2% to around 30% in the next five years, the government and domestic leaders in EVs are not skipping any steps—or rather, steering—in this direction. All consumer categories are starting to choose electric cars (EVs) due to the growing expense of gasoline and diesel as well as the environmental problems associated with them. But will we just wind up giving a market that local players and incentives have established to the likes of Tesla and the Chinese Build Your Dreams (BYD) if the government extends a warm welcome to international EV-makers? There is cause for concern about foreign players flooding the EV market, which would be detrimental to "Made in India" and "Atmanirbhar Bharat."

Despite the nation being in the middle of general elections, Chinese businesses seem to be at the front of the line queuing up before government offices in New Delhi among the foreign players waiting up to join EV production in India.

In addition to the financial gain from selling their completed vehicles, Chinese enterprises have other motives for joining the Indian EV industry. For example, China's steel output has surged, but a slump in the country's real estate market and infrastructure expenditures have resulted in a surplus and overcapacity of steel, which has caused steel prices to plummet. There must be a use for all that steel.

Furthermore, China's partner nations have slowed down or stopped some Belt & Road Initiative (BRI) projects, which has caused a decline in Chinese exports. Meanwhile, the Biden administration increased aluminum and steel tariffs on China. Two significant Vietnamese steel manufacturers opened an anti-dumping investigation against China's shipments of hot-rolled steel in March. In an effort to help struggling local manufacturers, Chile chose to apply temporary anti-dumping charges on Chinese steel goods used in its mining sector. Since December, Mexico has levied tariffs on steel from China.

China will need to look for new goods that can absorb all that steel since all these barriers are competing with its steel exports. EVs provide one such chance. Is there a connection between it and the Chinese company's decision to collaborate with an Indian steelmaker to produce electric vehicles in India?

In the meanwhile, Stellantis, the fourth-largest carmaker in the world, has been approved by China's National Development and Reform Commission (NDRC) to acquire a 20% share in Leapmotor. This would enable the Chinese automaker to produce and market electric vehicles (EVs) outside of China, including India.

Having surpassed Tesla last year to become the biggest EV manufacturer in the world, BYD aims to dominate the Rs 30-lakh-plus EV segment and capture 90% of the Indian EV market. Tesla joined the Indian market in 2021. In an effort to establish a production facility, BYD and an Indian auto parts manufacturer petitioned the government last year, but their request was turned down. However, BYD's Indian subsidiary is optimistic that it will occur shortly. It is believed to be indicating a fierce pricing battle in India, similar to what has occurred in China, when it announces new models and offers discounts in the next months. Elon Musk stunned everyone lately by abandoning an anticipated vacation to India, during which he was projected to see Prime Minister Modi, and taking off to China, where he started the development of his autonomous vehicle software. Tesla has declared ambitions to join the Indian market.

It is challenging to explain the government's soft policy of allowing Chinese electric vehicles and steel imports into India at a time when India-China relations are tense due to an ongoing military standoff in the Ladakh sector following China's incursions there in April 2020, particularly as China intensifies its territorial ambitions in the Arunachal sector. The government has consistently rejected Islamabad's proposals for trade with India, claiming that "terrorism and trade cannot go together." Delhi has made it clear after 21 rounds of negotiations that China must remove its soldiers and disengage from the Depsang and Demchok regions before normality can be restored. In addition to safeguarding Indian industry from unscrupulous Chinese and other foreign companies in order to bolster Made in India, New Delhi is obligated by strategic and security considerations to prevent Chinese investments and commerce from entering the Indian market.