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Last year, India's largest company, Reliance Industries, quietly sent hundreds of executives and engineers to China. They fanned out across industrial hubs on the mainland, including Shinzen and Wushi. They were in a race against time. China was about to restrict exports of a range of vital technologies, and Reliance needed to secure critical equipment and tech to build a
massive battery factory back home. The employees had just over a month to pull it off before those export controls were supposed to kick in.
And what they're trying to do is just make sure that the machines they need are first manufactured in time, and once they're manufactured, that they actually passed customs and they're put on ships and they are moving towards India.
Alicia Sachdev is Bloomberg's business reporter based in New Delhi. She says a race to secure these machines was just one piece of the puzzle.
Well, then now after is something beyond equipment. They need access to the know how that makes those machines actually work. And that's where Reliance is really stuck now, is to really be able to have access to technology even though it has the machinery.
Reliance needs both the equipment and the know how expertise that China dominates in the field. The problem is China has no plans to share any of it.
In minutes, so we've got some announcements from China.
They're looking to implement export controls on rress items and also ones that are related to tech.
China wants to really ring fence the dominance that it's built over the last decade. It does not really want to lose its edge that it's built painstakingly in manufacturing sectors. And for Indian companies which have ambitions to build out battery plants for example, time is off.
The essence the struggle of Reliance and India's back battery industry, it's just one piece of a much bigger story. India has set an ambitious goal to become a global manufacturing powerhouse, an alternative to China.
Your line Custer Make in India.
Back in twenty fourteen, Prime Minister and re Render Modi launched the Make an India initiative. It promised to grow the country's manufacturing sector and create millions of jobs, and yet even after billions were invested under the initiative, India's manufacturing in critical sectors is now even more dependent on China.
What the Reliance example really has shown us is that in key up and coming sectors like batteries, like sophisticated electronics manufacturing, China really holds all the choke points, whether it's the supply of fraw materials, whether it's critical machinery, whether it's the technology and know how, all of that sits concentrated in China.
In the end, thanks to the fast war of its team, Reliance managed to secure more than a billion dollars worth of equipment. But Reliance is India's biggest company. Other firms haven't been so lucky.
We are kind of in this race with our hands teined behind our backs. The US, for example, which has a lot of tech expertise, China, which has manufacturing expertise. In India, we kind of have neither at this point in time when it comes to these advanced sectors. So that's really where our dependence on China kind of holds us back.
Welcome to the Big Take Asia from Homemberg News. I'm Wanha. Every week we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever shifting region. Today, in the show India's Manufacturing Dream and Why I Can't achieve it without China, we look at how corporate India is navigating a complex geopolitical landscape as it searches for alternatives. The factory Reliance is building sits in Jamnagar, a city on
India's west coast. Mukesh and Bani Reliance, as chairman and Asia's richest man, has a bold vision for this place. His company is building a sprawling battery plant here the foundation of Ambani's green revolution. Here's Ambani's youngest son, Anant Reliance as executive director, talking about it.
It will be unmatched globally in size, scale and integration. Five million manners of engineering, forty four million square feet of building area, equivalent to four times the size of the Tesla Giga factory.
They say this would be capable of producing everything from solar panels to litha min cells and then trees for energy storage, even green hydrogen and fuel cells.
Bloomberg's Alisha Satchdev says this vast renewable energy complex is an ambitious plan, but reliance is running up against a problem as old as global industry itself. Technology transfer.
Quite simply, technology transfer is when a company or when an entity shares the knowledge and the know how needed to manufacture something. So it's not just machines, but the processes, the training, the operational ecosystems.
China understands this well. Back in the nineteen nineties and two thousands, it used mandatory joint ventures as a way to learn from foreign companies in key industries. It required US, European and Japanese firms to share their technology in exchange for access to the Chinese market. Over time, those partnerships help Chinese companies absorb, refine, and eventually master know how in industry like cars, rare earths and batteries.
In cold light of day, the supply chain for battery cells sits entirely in China, whether it's raw materials from lithium to cobald to the technology that of course you need to make the cells, to the equipment and the tooling you need to make the cells also. So that's the kind of dependence that we're looking at. And there has been this trajectory of China curbing the transfer of technology.
In October, China timed export controls on some parts of the battery supply chain. Some lithium ion batteries can't leave the country without government approval. These curbs grew out of the tear for war with the US. China has since paused its ban on exports of rare earths and other critical materials as part of a broader effort to ease
trade tensions, but still India continues to be largely cut off. Now, none of these measures were aimed specifically at India, but Alicia says that the spillover has hit India especially hard and in many ways the country has emerged as one of the biggest losers.
And that's because while other manufacturing rivals, like in Japan or South Korea, for instance, already have some kind of leg up in manufacturing tech, India is beginning a lot of these industries from scratch, and therefore time is off. The essence, the more difficulties we face in actually accessing this technology, the gap will keep on widening and it will become harder for US to catch up.
India has set an ambitious goal for advanced battery cell manufacturing. Over the next five years, Indian companies plan to build a combined one hundred and seventy eight gigawa hours of capacity. That's enough to fully charge nearly three million teslas or to power around seventeen thousand American homes for a year. But Alicia says it's a very distant goal.
So out of that one seventy eight gigawat that has been announced in India, what we do have at present is only one gigaward hour, So it's such a small fraction of the ambition that India has outlined for itself. Almost all the electric vehicles that are sold in India, and there are millions of them every year, almost all of them bank entirely on important battery cells.
And beyond batteries, Alicia, where else does China hold kind of this strategic squeeze that we've been talking about, well.
Pretty much all of the core industries that India is looking to develop at this point in time. We can take a clue from earlier this year. On February one, India's Finance Minister and Malassi that I am and delivered a speech in the Parliament.
Scaling up manufacturing in seven strategic and frontier sectors.
She highlighted seven high tech areas that will form the frontier of its manufacturing led growth model. These would include advanced chemistry, cells, semiconductors, renewable energy, official intelligence, biotech, space tech and defense manufacturing.
Take semiconductors for example, it's become a big focus for the Indian government. The country has committed billions of dollars in incentives and subsidies to kickstart chip making plants. The problem is it can't do it alone.
One example that again illustrates the extent of our dependence is the Tata Group's advanced chip manufacturing plant in Hulera in the western Indian state of good Shad. This will, by the way, be the first and the biggest fab that India will have in the country, and that itself remains dependent on Chinese raw materials like gallium and high purity silicon, at least in its initial years. Another area where China really dominates in tech is electronics and electronics components.
So the one big success to all the India has had is with Apple. Now, India makes about a quarter of Apples iPhones globally, But when you look at what India is actually making. We're largely a st the iPhones and much of the higher value components in the bill of materials that go into that assembly, and all the specialized production equipment still traces back to Chinese supply chains.
Alicia says it's not that China refuses to share technology altogether.
China does not quite mind sharing technology which is several generations behind what it's already pioneering. So that's the kind of access that it is okay to give. It's not like a blanket man on sharing all kinds of technologies, but the really sophisticated tech is something that it does want to keep close to home.
It's a serious roadblock for Prime Minister and arendom Modi, who wants to boost manufacturing to make up a quarter of India's GDP, but instead of climbing, manufacturer has been falling down to just thirteen percent. In twenty twenty four, coming up how corporate India is trying to work with and around China and what time may be running out. The relationship between India and China has never been easy. The two countries share a long contested border and a
history of clashes that continues to shape their mistrust. Today, trade between them has grown, and while India has come to see China as a vital partner in the region, it also regards it as a strategic rival. Bloomberg's Alicia Sachdev says that tensions still guide New Delhi's policies.
Even smaller things like sourcing windshields or like glass parts from China. India will impose quality control orders on which you know justifiably so because these are parts that can be sourced out of India, but companies would prefer to buy them from China because of the lower costs. For many China Chinese businesses, India is a very lucrative, large market for end products. Investing in or accessing the Indian market is not exactly something that India has made very
easy for those businesses. Even something like obtaining visas for its citizens is quite hard for the Chinese. At this point in time, India hasn't granted weisa to the top byd India executive to come and visit India. So it's been over five or six years that they've been able to even come and see their factories in the south of India. So that's the kind of impediment that we're really talking about.
Alicia, I want to ask you something that may seem a little obvious, but the Indian government set these ambitious goals for high tech manufacturing capacity, right, didn't they realize from the outset that they'd need Chinese expertise to reach those targets.
So when India was really just about beginning it's making India initiative and formulating these various productions linked incentive programs for core industries, I believe it started off with more optimism than was possibly warranted at the time. And at that time, perhaps what India did not quite fully anticipate is that these export controls that China has embugged on
now wouldn't fold the way they have. Technology was never going to be very easy to get, but that had really been the order of business for many years.
In recent weeks, India has eased restrictions on some Chinese investment for the first time in nearly six years. Companies where Chinese owners hold stakes of ten percent or less will now qualify to receive automatic regulatory approval. The hope is that this will help boost local manufacturing and possibly create space for the technology transfer India badly needs, but
the door is only partly open. Much of the Indian economy remains off limits and only certain types of Chinese companies need apply.
If you look at an auto sector, for instance, where India has a thriving local industry which can be disrupted by giants like BYD, it is far more skeptical and it has actually rejected proposals for investments from a bid from a Great Wall Motor. So there is deep strategic mistrust between the two countries and that really keeps both of them sort of, you know, walking on eggshells around each other.
In the meantime, Alicia says there are other options for technology transfer from countries like South Korea, Japan and the West, but they come with big trade offs.
If you go to a South Korea, which Mawny companies in India do currently source from, they come at about a twenty twenty five percent higher cost than China. That is also technology which may not be very suitable to the Indian condition. If we're talking about NMC cells or nickel manganese co ball cells, these are very high energy efficiency and with temperatures soaring in there's always a risk
of thermal runway incidents, particularly in electric vehicles. So the suitability of tech is one aspect, the scalability of tech is another aspect, and of course while it all comes down too is cost because we are a very highly priced and malue conscious market too. And all of those things point us back to China.
For now, Indian corporates have developed an approach to work with and around China, flying low on the government radar and operating in the gray area.
One thing that we've actually seen happens a lot these days is that deals between Indian and Chinese companies take place in third countries. So companies would largely just avoid large red flags by meeting in third countries like a Singapore in Sri Lanka or Hong Kong or even Thighland to conduct their business to get around the difficulty of
obtaining visas. What's also taking place is that sometimes you don't want to appear very high profile in your procurement out of China, so large companies will really bank on very small suppliers to go the small shipment route. And then of course the last thing is that they are able to lobby the government that working with China is really and imperative it's not something that you can close
your eyes to. So as a result of those negotiations, companies have been able to actually secure some amendments to the very harsh investment screening criterias that India had put in place five or six years ago. So a bunch of workarounds are enabling that business sort of lusk continue to happen even in these sort of really fraud times.
And are these workarounds, I mean, are they the key to really solve India's China problem.
The workarounds do help, but they don't fully solve the extent of the problem that we are seeing because large scale manufacturing, in the kind of large scale tech transfer that we're talking about cannot be on the point, remain low profile. And the binder is really that Chinese companies can end up having very little say in the face
of government directives. If China does want to restrict access to technology, even though It's companies would find that it's in their commercial interest to work with certain countries or certain companies, it can kind of hold them back. So it does need a diplomatic breakthrough at some level for this problem to be fully resolved.
So what can India then do to break this cycle. To break through, the.
Only option before India is to really identify the next window and really catch the next generational lead in technology. For many existing industries, the ship may have sailed for India, for example, it could perhaps be physically. The advantage India has is in the vast population that it has and the immense amount of data that it can generate, and of course the vast demand that it has for these
advanced technologies. So it does have the potential to offer scale in all of these industries, but it needs to figure out the next window in terms of when it can do that instead of now just trying to put nearly catch up to where China has a clear dominance already.
This is The Big Take Asia from Bloomberg News. I'm wanha. To get more from The Big Take and unlimited access to all of Bloomberg dot Com, subscribe today at Bloomberg dot com slash podcast offer. If you like the episode, make sure to subscribe and review The Big Take Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening, See you next time.