Investors have pulled back from sectors too dependent on China given the shaky geopolitical scenario
Indian startups, especially in the electric vehicles (EVs) space, are reportedly looking at tough times ahead after border tensions between neighbour India and China escalated.
The sector is highly dependent on Chinese imports and may find it increasingly difficult to draw funds from private equity players and venture capital funds in light of the recent event, sources told Mint.
“PE and VC investors have in the last few months become apprehensive of startups that have substantial exposure to China. They fear that with rising pressures from the Indian government, these startups can face disruption in supply chain whenever bilateral ties take a hit,” a source added.
Moneycontrol could not independently verify the report.
Investors have thus pulled back from sectors too dependent on China given the shaky geopolitical scenario and EV-makers seem poised to be the biggest losers.
This is evident in the fact that since 2018, companies such as Magenta PowerGrid, Yulu, Ola Electric, Ather Energy and Lithium Urban Technologies pulled in funding from diverse sources including SoftBank Group and Tiger Global Management LLC. In fact, Indian industrialist Ratan Tata and Pawan Munjal had also expressed interest in the space.
This came after policy push and incentives for electric mobility and eco-friendly vehicles from the Indian government.
“Investors these days are looking to eliminate any external risk on the supply chain, and exposure to China is now considered a long-term risk. Any startup that is assembling vehicles by importing components from China is 100% at risk now," Maxson Lewis, managing director of Magenta ChargeGrid and EV charging station manufacturing startup told the paper.
Localisation, if possible, would take a long time. At present, less than 20 percent of e-three-wheelers and associated parts are made in India. Accessories such as lithium-ion cells, battery packs and electric motors are also imported from China or Taiwan.
Indian and Chinese troops clashed in the Galwan Valley, Ladakh near the Line of Actual Control (LAC) in June. As many as 20 Indian army personnel were killed in the scuffle, post which India banned 59 Chinese mobile applications and imposed increased scrutiny on imports and investments from the northern neighbour.