Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Last year, India's largest company, Reliance Industries, quietly sent hundreds
Speaker 2: of executives and engineers to China. They fanned out across
Speaker 2: industrial hubs on the mainland, including Shinzen and Wushi. They
Speaker 2: were in a race against time. China was about to
Speaker 2: restrict exports of a range of vital technologies, and Reliance
Speaker 2: needed to secure critical equipment and tech to build a
Speaker 2: massive battery factory back home. The employees had just over
Speaker 2: a month to pull it off before those export controls
Speaker 2: were supposed to kick in.
Speaker 3: And what they're trying to do is just make sure
Speaker 3: that the machines they need are first manufactured in time,
Speaker 3: and once they're manufactured, that they actually passed customs and
Speaker 3: they're put on ships and they are moving towards India.
Speaker 2: Alicia Sachdev is Bloomberg's business reporter based in New Delhi.
Speaker 2: She says a race to secure these machines was just
Speaker 2: one piece of the puzzle.
Speaker 3: Well, then now after is something beyond equipment. They need
Speaker 3: access to the know how that makes those machines actually work.
Speaker 3: And that's where Reliance is really stuck now, is to
Speaker 3: really be able to have access to technology even though
Speaker 3: it has the machinery.
Speaker 2: Reliance needs both the equipment and the know how expertise
Speaker 2: that China dominates in the field. The problem is China
Speaker 2: has no plans to share any of it.
Speaker 3: In minutes, so we've got some announcements from China.
Speaker 2: They're looking to implement export controls on rress items and
Speaker 2: also ones that are related to tech.
Speaker 3: China wants to really ring fence the dominance that it's
Speaker 3: built over the last decade. It does not really want
Speaker 3: to lose its edge that it's built painstakingly in manufacturing sectors.
Speaker 3: And for Indian companies which have ambitions to build out
Speaker 3: battery plants for example, time is off.
Speaker 2: The essence the struggle of Reliance and India's back battery industry,
Speaker 2: it's just one piece of a much bigger story. India
Speaker 2: has set an ambitious goal to become a global manufacturing powerhouse,
Speaker 2: an alternative to China.
Speaker 4: Your line Custer Make in India.
Speaker 2: Back in twenty fourteen, Prime Minister and re Render Modi
Speaker 2: launched the Make an India initiative. It promised to grow
Speaker 2: the country's manufacturing sector and create millions of jobs, and
Speaker 2: yet even after billions were invested under the initiative, India's
Speaker 2: manufacturing in critical sectors is now even more dependent on China.
Speaker 3: What the Reliance example really has shown us is that
Speaker 3: in key up and coming sectors like batteries, like sophisticated
Speaker 3: electronics manufacturing, China really holds all the choke points, whether
Speaker 3: it's the supply of fraw materials, whether it's critical machinery,
Speaker 3: whether it's the technology and know how, all of that
Speaker 3: sits concentrated in China.
Speaker 2: In the end, thanks to the fast war of its team,
Speaker 2: Reliance managed to secure more than a billion dollars worth
Speaker 2: of equipment. But Reliance is India's biggest company. Other firms
Speaker 2: haven't been so lucky.
Speaker 3: We are kind of in this race with our hands
Speaker 3: teined behind our backs. The US, for example, which has
Speaker 3: a lot of tech expertise, China, which has manufacturing expertise.
Speaker 3: In India, we kind of have neither at this point
Speaker 3: in time when it comes to these advanced sectors. So
Speaker 3: that's really where our dependence on China kind of holds
Speaker 3: us back.
Speaker 2: Welcome to the Big Take Asia from Homemberg News. I'm Wanha.
Speaker 2: Every week we take you inside some of the world's
Speaker 2: biggest and most powerful economies and the markets, tycoons, and
Speaker 2: businesses that drive this ever shifting region. Today, in the
Speaker 2: show India's Manufacturing Dream and Why I Can't achieve it
Speaker 2: without China, we look at how corporate India is navigating
Speaker 2: a complex geopolitical landscape as it searches for alternatives. The
Speaker 2: factory Reliance is building sits in Jamnagar, a city on
Speaker 2: India's west coast. Mukesh and Bani Reliance, as chairman and
Speaker 2: Asia's richest man, has a bold vision for this place.
Speaker 2: His company is building a sprawling battery plant here the
Speaker 2: foundation of Ambani's green revolution. Here's Ambani's youngest son, Anant
Speaker 2: Reliance as executive director, talking about it.
Speaker 4: It will be unmatched globally in size, scale and integration.
Speaker 4: Five million manners of engineering, forty four million square feet
Speaker 4: of building area, equivalent to four times the size of
Speaker 4: the Tesla Giga factory.
Speaker 3: They say this would be capable of producing everything from
Speaker 3: solar panels to litha min cells and then trees for
Speaker 3: energy storage, even green hydrogen and fuel cells.
Speaker 2: Bloomberg's Alisha Satchdev says this vast renewable energy complex is
Speaker 2: an ambitious plan, but reliance is running up against a
Speaker 2: problem as old as global industry itself. Technology transfer.
Speaker 3: Quite simply, technology transfer is when a company or when
Speaker 3: an entity shares the knowledge and the know how needed
Speaker 3: to manufacture something. So it's not just machines, but the processes,
Speaker 3: the training, the operational ecosystems.
Speaker 2: China understands this well. Back in the nineteen nineties and
Speaker 2: two thousands, it used mandatory joint ventures as a way
Speaker 2: to learn from foreign companies in key industries. It required US,
Speaker 2: European and Japanese firms to share their technology in exchange
Speaker 2: for access to the Chinese market. Over time, those partnerships
Speaker 2: help Chinese companies absorb, refine, and eventually master know how
Speaker 2: in industry like cars, rare earths and batteries.
Speaker 3: In cold light of day, the supply chain for battery
Speaker 3: cells sits entirely in China, whether it's raw materials from
Speaker 3: lithium to cobald to the technology that of course you
Speaker 3: need to make the cells, to the equipment and the
Speaker 3: tooling you need to make the cells also. So that's
Speaker 3: the kind of dependence that we're looking at. And there
Speaker 3: has been this trajectory of China curbing the transfer of technology.
Speaker 2: In October, China timed export controls on some parts of
Speaker 2: the battery supply chain. Some lithium ion batteries can't leave
Speaker 2: the country without government approval. These curbs grew out of
Speaker 2: the tear for war with the US. China has since
Speaker 2: paused its ban on exports of rare earths and other
Speaker 2: critical materials as part of a broader effort to ease
Speaker 2: trade tensions, but still India continues to be largely cut off. Now,
Speaker 2: none of these measures were aimed specifically at India, but
Speaker 2: Alicia says that the spillover has hit India especially hard
Speaker 2: and in many ways the country has emerged as one
Speaker 2: of the biggest losers.
Speaker 3: And that's because while other manufacturing rivals, like in Japan
Speaker 3: or South Korea, for instance, already have some kind of
Speaker 3: leg up in manufacturing tech, India is beginning a lot
Speaker 3: of these industries from scratch, and therefore time is off.
Speaker 3: The essence, the more difficulties we face in actually accessing
Speaker 3: this technology, the gap will keep on widening and it
Speaker 3: will become harder for US to catch up.
Speaker 2: India has set an ambitious goal for advanced battery cell manufacturing.
Speaker 2: Over the next five years, Indian companies plan to build
Speaker 2: a combined one hundred and seventy eight gigawa hours of capacity.
Speaker 2: That's enough to fully charge nearly three million teslas or
Speaker 2: to power around seventeen thousand American homes for a year.
Speaker 2: But Alicia says it's a very distant goal.
Speaker 3: So out of that one seventy eight gigawat that has
Speaker 3: been announced in India, what we do have at present
Speaker 3: is only one gigaward hour, So it's such a small
Speaker 3: fraction of the ambition that India has outlined for itself.
Speaker 3: Almost all the electric vehicles that are sold in India,
Speaker 3: and there are millions of them every year, almost all
Speaker 3: of them bank entirely on important battery cells.
Speaker 2: And beyond batteries, Alicia, where else does China hold kind
Speaker 2: of this strategic squeeze that we've been talking about, well.
Speaker 3: Pretty much all of the core industries that India is
Speaker 3: looking to develop at this point in time. We can
Speaker 3: take a clue from earlier this year. On February one,
Speaker 3: India's Finance Minister and Malassi that I am and delivered
Speaker 3: a speech in the Parliament.
Speaker 4: Scaling up manufacturing in seven strategic and frontier sectors.
Speaker 3: She highlighted seven high tech areas that will form the
Speaker 3: frontier of its manufacturing led growth model. These would include
Speaker 3: advanced chemistry, cells, semiconductors, renewable energy, official intelligence, biotech, space
Speaker 3: tech and defense manufacturing.
Speaker 2: Take semiconductors for example, it's become a big focus for
Speaker 2: the Indian government. The country has committed billions of dollars
Speaker 2: in incentives and subsidies to kickstart chip making plants. The
Speaker 2: problem is it can't do it alone.
Speaker 3: One example that again illustrates the extent of our dependence
Speaker 3: is the Tata Group's advanced chip manufacturing plant in Hulera
Speaker 3: in the western Indian state of good Shad. This will,
Speaker 3: by the way, be the first and the biggest fab
Speaker 3: that India will have in the country, and that itself
Speaker 3: remains dependent on Chinese raw materials like gallium and high
Speaker 3: purity silicon, at least in its initial years. Another area
Speaker 3: where China really dominates in tech is electronics and electronics components.
Speaker 3: So the one big success to all the India has
Speaker 3: had is with Apple. Now, India makes about a quarter
Speaker 3: of Apples iPhones globally, But when you look at what
Speaker 3: India is actually making. We're largely a st the iPhones
Speaker 3: and much of the higher value components in the bill
Speaker 3: of materials that go into that assembly, and all the
Speaker 3: specialized production equipment still traces back to Chinese supply chains.
Speaker 2: Alicia says it's not that China refuses to share technology altogether.
Speaker 3: China does not quite mind sharing technology which is several
Speaker 3: generations behind what it's already pioneering. So that's the kind
Speaker 3: of access that it is okay to give. It's not
Speaker 3: like a blanket man on sharing all kinds of technologies,
Speaker 3: but the really sophisticated tech is something that it does
Speaker 3: want to keep close to home.
Speaker 2: It's a serious roadblock for Prime Minister and arendom Modi,
Speaker 2: who wants to boost manufacturing to make up a quarter
Speaker 2: of India's GDP, but instead of climbing, manufacturer has been
Speaker 2: falling down to just thirteen percent. In twenty twenty four,
Speaker 2: coming up how corporate India is trying to work with
Speaker 2: and around China and what time may be running out.
Speaker 2: The relationship between India and China has never been easy.
Speaker 2: The two countries share a long contested border and a
Speaker 2: history of clashes that continues to shape their mistrust. Today,
Speaker 2: trade between them has grown, and while India has come
Speaker 2: to see China as a vital partner in the region,
Speaker 2: it also regards it as a strategic rival. Bloomberg's Alicia
Speaker 2: Sachdev says that tensions still guide New Delhi's policies.
Speaker 3: Even smaller things like sourcing windshields or like glass parts
Speaker 3: from China. India will impose quality control orders on which
Speaker 3: you know justifiably so because these are parts that can
Speaker 3: be sourced out of India, but companies would prefer to
Speaker 3: buy them from China because of the lower costs. For
Speaker 3: many China Chinese businesses, India is a very lucrative, large
Speaker 3: market for end products. Investing in or accessing the Indian
Speaker 3: market is not exactly something that India has made very
Speaker 3: easy for those businesses. Even something like obtaining visas for
Speaker 3: its citizens is quite hard for the Chinese. At this
Speaker 3: point in time, India hasn't granted weisa to the top
Speaker 3: byd India executive to come and visit India. So it's
Speaker 3: been over five or six years that they've been able
Speaker 3: to even come and see their factories in the south
Speaker 3: of India. So that's the kind of impediment that we're
Speaker 3: really talking about.
Speaker 1: Alicia, I want to ask you something that may seem
Speaker 1: a little obvious, but the Indian government set these ambitious
Speaker 1: goals for high tech manufacturing capacity, right, didn't they realize
Speaker 1: from the outset that they'd need Chinese expertise to reach
Speaker 1: those targets.
Speaker 3: So when India was really just about beginning it's making
Speaker 3: India initiative and formulating these various productions linked incentive programs
Speaker 3: for core industries, I believe it started off with more
Speaker 3: optimism than was possibly warranted at the time. And at
Speaker 3: that time, perhaps what India did not quite fully anticipate
Speaker 3: is that these export controls that China has embugged on
Speaker 3: now wouldn't fold the way they have. Technology was never
Speaker 3: going to be very easy to get, but that had
Speaker 3: really been the order of business for many years.
Speaker 2: In recent weeks, India has eased restrictions on some Chinese
Speaker 2: investment for the first time in nearly six years. Companies
Speaker 2: where Chinese owners hold stakes of ten percent or less
Speaker 2: will now qualify to receive automatic regulatory approval. The hope
Speaker 2: is that this will help boost local manufacturing and possibly
Speaker 2: create space for the technology transfer India badly needs, but
Speaker 2: the door is only partly open. Much of the Indian
Speaker 2: economy remains off limits and only certain types of Chinese
Speaker 2: companies need apply.
Speaker 3: If you look at an auto sector, for instance, where
Speaker 3: India has a thriving local industry which can be disrupted
Speaker 3: by giants like BYD, it is far more skeptical and
Speaker 3: it has actually rejected proposals for investments from a bid
Speaker 3: from a Great Wall Motor. So there is deep strategic
Speaker 3: mistrust between the two countries and that really keeps both
Speaker 3: of them sort of, you know, walking on eggshells around
Speaker 3: each other.
Speaker 2: In the meantime, Alicia says there are other options for
Speaker 2: technology transfer from countries like South Korea, Japan and the West,
Speaker 2: but they come with big trade offs.
Speaker 3: If you go to a South Korea, which Mawny companies
Speaker 3: in India do currently source from, they come at about
Speaker 3: a twenty twenty five percent higher cost than China. That
Speaker 3: is also technology which may not be very suitable to
Speaker 3: the Indian condition. If we're talking about NMC cells or
Speaker 3: nickel manganese co ball cells, these are very high energy
Speaker 3: efficiency and with temperatures soaring in there's always a risk
Speaker 3: of thermal runway incidents, particularly in electric vehicles. So the
Speaker 3: suitability of tech is one aspect, the scalability of tech
Speaker 3: is another aspect, and of course while it all comes
Speaker 3: down too is cost because we are a very highly
Speaker 3: priced and malue conscious market too. And all of those
Speaker 3: things point us back to China.
Speaker 2: For now, Indian corporates have developed an approach to work
Speaker 2: with and around China, flying low on the government radar
Speaker 2: and operating in the gray area.
Speaker 3: One thing that we've actually seen happens a lot these
Speaker 3: days is that deals between Indian and Chinese companies take
Speaker 3: place in third countries. So companies would largely just avoid
Speaker 3: large red flags by meeting in third countries like a
Speaker 3: Singapore in Sri Lanka or Hong Kong or even Thighland
Speaker 3: to conduct their business to get around the difficulty of
Speaker 3: obtaining visas. What's also taking place is that sometimes you
Speaker 3: don't want to appear very high profile in your procurement
Speaker 3: out of China, so large companies will really bank on
Speaker 3: very small suppliers to go the small shipment route. And
Speaker 3: then of course the last thing is that they are
Speaker 3: able to lobby the government that working with China is
Speaker 3: really and imperative it's not something that you can close
Speaker 3: your eyes to. So as a result of those negotiations,
Speaker 3: companies have been able to actually secure some amendments to
Speaker 3: the very harsh investment screening criterias that India had put
Speaker 3: in place five or six years ago. So a bunch
Speaker 3: of workarounds are enabling that business sort of lusk continue
Speaker 3: to happen even in these sort of really fraud times.
Speaker 2: And are these workarounds, I mean, are they the key
Speaker 2: to really solve India's China problem.
Speaker 3: The workarounds do help, but they don't fully solve the
Speaker 3: extent of the problem that we are seeing because large
Speaker 3: scale manufacturing, in the kind of large scale tech transfer
Speaker 3: that we're talking about cannot be on the point, remain
Speaker 3: low profile. And the binder is really that Chinese companies
Speaker 3: can end up having very little say in the face
Speaker 3: of government directives. If China does want to restrict access
Speaker 3: to technology, even though It's companies would find that it's
Speaker 3: in their commercial interest to work with certain countries or
Speaker 3: certain companies, it can kind of hold them back. So
Speaker 3: it does need a diplomatic breakthrough at some level for
Speaker 3: this problem to be fully resolved.
Speaker 2: So what can India then do to break this cycle.
Speaker 2: To break through, the.
Speaker 3: Only option before India is to really identify the next
Speaker 3: window and really catch the next generational lead in technology.
Speaker 3: For many existing industries, the ship may have sailed for India,
Speaker 3: for example, it could perhaps be physically. The advantage India
Speaker 3: has is in the vast population that it has and
Speaker 3: the immense amount of data that it can generate, and
Speaker 3: of course the vast demand that it has for these
Speaker 3: advanced technologies. So it does have the potential to offer
Speaker 3: scale in all of these industries, but it needs to
Speaker 3: figure out the next window in terms of when it
Speaker 3: can do that instead of now just trying to put
Speaker 3: nearly catch up to where China has a clear dominance already.
Speaker 2: This is The Big Take Asia from Bloomberg News. I'm wanha.
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