Electric vehicles are soon going to be the norm. For developing economies two-wheelers are going to be the mainstay for the EV industry. Many start-ups have entered the space and are working on disrupting the economy. Some companies are selling these two-wheelers, while many others are using them for shared mobility services. However, for the price advantage and manufacturing experience almost all companies have to look towards China for sourcing the components for these vehicles. Some companies are even sourcing the complete kits and assembling them locally in their countries.
For new entrants its not so easy to understand the Chinese supplier jungle and then maintaining factors like consistent quality, shipping issues, supply terms and similar monsters - they are a challenge for any new company. Another important challenge is obtaining a clear understanding of the regulatory requirements in their home countries and fitting in the policy frameworks while keeping costs low. For e.g. FAME II in India mandates 50% of the vehicle components value should be Made in India. Through this article we would try to break down the right method to import these vehicle kits/components form China.
Once you have figured out the right specifications for your product, below stages would be important for setting up a successful supply chain:
Selecting the right vendors: This is by far the most important step in your sourcing strategy. Finding the right partner is important for a whole lot of reasons. Product matching, ability to customize, quality control, shipment control, pricing, payment terms among others are crucial factors that make vendor selection so important. If you are not sure of the market, its better to use help from professionals who could help you meet the right vendors, do inspections or audits and help you negotiate pricing and business terms.
Managing the regulatory frameworks: Each country would have some requirements and restrictions on importing components or making the vehicles. For e.g. India needs BIS for all lithium batteries and hence its much easier to use batteries assembled in India. Also, this helps to cover major fraction of the 50% Made in India value of the scooter. Another important factor is once the sample is ready, it needs to be tested and certified by authorities before the model can be commercially used. ARAI or ICAT are these organizations in India.
Finding the logistics partners: Good logistics partners like freight forwarders, CHA etc. are very important for ironing out minor hiccups during import. For e.g. custom clearance of a fully assembled scooter sample at Bangalore airport is not allowed. Only an experienced CHA would warn you in advance and save a lot of hassles plus money.
Shipping and imports: Planning actual lead time, checking samples before shipment, ensuring all documentation is in place and the forwarder is in loop, is very important for shipping out the products from China. A prerequisite is to be prepared with IEC code and all documents before importing. If you don’t have IEC or don’t want to get into hassle of imports, you can utilize help from an experienced company who can import good on your behalf and offer it to you within your country. This way you can also pay them in local currency and avoid bank processes of remittance as well.
Local assembly: Whether to assemble inhouse or outsource it to a specialized third party is a strategic business decision. Some brands do it on their own and some big brands outsource it. Setting up your own space or finalizing the right partner can have different financial and operational implications and hence need to be carefully implemented.
This is the right time to enter the electric vehicle industry. If you are planning to start your own electric vehicle business or need scooters for your shared mobility fleet but you are not sure of the Chinese supplier ecosystem, get in touch with us.
Aurora Ventures offers supply chain support and consulting from China for Electric Vehicle companies. Get in touch at firstname.lastname@example.org to know more.