- Batteries make up for 50 percent of the cost of an electric vehicle, India imports this crucial component from China
- Localisation of EV batteries is in the fray, but it can’t happen overnight, suggest experts
- Several foreign players have shown an interest in the Indian government’s plan to create large factories to make lithium-ion batteries
Over the last few months, there is a renewed buzz around electric vehicles. The positive environmental impact coupled with an outcry for ‘Atmanirbhar India’ has given this industry a new lease of life post Covid. Amid calls for ‘boycott China’, India is trying to step up its game on battery manufacturing which is required to propel the country’s dream to steer clean mobility.
Batteries make up for 50 percent of the cost of an electric vehicle, and like most countries, India imports this crucial component from China. According to CleanTechnica, India imported USD 1.23 billion worth of lithium-ion batteries in 2018-19, six times higher than in 2014-15.
Moreover, as per the ‘Global EV Outlook 2019’ report released by International Energy Agency (IEA), the global electric car fleet exceeded 5.1 million in 2018, with a whopping 45% of these in China, up from just 8% in 2013, attesting to China’s dominance as the world’s largest electric car market.
Localisation of EV batteries is in the fray, but it can’t happen overnight, suggest experts. Last year, NITI Aayog sought the Cabinet approval for a proposal to build up to 10 large factories that would get subsidies to produce lithium-ion batteries used in electric vehicles, states a report by The Economic Times. Further, bids will be invited to set up gigafactories ( a term coined by Tesla that translates into a large manufacturing facility) with a total capacity of 50 Gigawatt hours (GWh) over a span of 10 years.
“When you talk of assembling in India, initially you can do modules, and from modules, you can go to cells, because everybody imports cells right now. So when you do the assembly, you still have a lot of value addition there in terms of battery management system, thermal management system. Cell manufacturing is the last thing in the value chain, as far as car batteries are concerned,” as shared by Rajeev Chaba, President and MD, MG Motor, on The Blue Circle Webinar.
“At some point, we will have to do it because we are looking at large-scale transformation to electric mobility. From a practical point of view, we will have to do it in steps. Currently, the trend in India is to source cells, build battery packs here in India, integrate it with battery management systems and chargers. This is one level of technical know-how that we have in India right now. A lot of companies are involved in this and many more are getting into this,” he shared with TBC.
In 2013, the government launched the National Electric Mobility Mission (NEMMP) to turn the electric vehicle dream into reality and over the next years introduced FAME I and II schemes to generate interest amongst the price-sensitive Indian consumer.
It also made policy interventions with regard to batteries. In 2019, the National Mission on Transformative Mobility and Battery Storage was established with the following objectives, according to the Press Bureau of India:
- To drive clean, connected, shared and sustainable mobility initiatives
- To launch a Phased Manufacturing Programme (PMP) to support setting up of a few large-scale, export-competitive integrated batteries and cell-manufacturing giga plants in India.
- To create a PMP for localizing production across the entire Electric Vehicles (EV) value chain.
This plan is likely to help the government incentivize battery production in India. That’s not all – according to NITI Aayog’s Advanced Chemistry Cell and Battery Gigafactory plan, manufacturers can expect to get incentives close to USD 25/kWh.
As per the Economic Times article, this proposed battery policy can be termed output-based rather than based on inputs, with subsidy being linked to capacity creation committed. The plan also suggests that those companies that can achieve 60% indigenisation by 2025 can apply for subsidy as well as avail the entire depreciation in one go.
State governments are also stepping up their game to offer capital subsidies in line with the central government. Gujarat has been at the forefront and has already witnessed investments for Li-on battery manufacturing; the state is also offering subsidised utilities, under the ambit of the state’s electronic policies. Suzuki Motor Corporation, Toshiba Corporation and Denso Corporation (JV) has invested Rs 37.15 billion and INR 12.14 billion, which will be distributed across two phases to build Li-ion battery assembly lines in Gujarat.
Telangana has announced incentives of 200 acres of land plus power and water facilities for manufacturing units, at a concessional rate. Andhra Pradesh took steps, way back in 2017, and announced allocation of 200-400 acres for development of the electric mobility-focused industrial park.
Maharashtra is not far behind, says a report by Invest India. Besides capital subsidies on fixed capital investments, the state will be an equity partner up to 9% in large, mega, and ultra-mega projects, with FCI over Rs 500 crores.
Growing Interest from Foreign Manufacturers
According to a report by Mint, America’s Tesla and China’s Contemporary Amperex Technology have shown interest on the back of a strong government push to make India a global manufacturing hub for electric vehicles and its components.
The government, looking to encourage more private investment in the sector, has initiated tax incentives for manufacturers and a basic customs duty safeguard from 2021-2030 for those making advanced chemistry cells and batteries in India.
The Mint report also suggests that battery storages will power clean electricity grids. India today stands tall amongst the top renewable energy producers of the world, with an installed renewable energy capacity of about 80 gigawatts (GW). The government’s mission is to achieve 175GW by 2022 and 500GW by 2030, as part of its commitment to climate change.
As startling as it may sound, each GWh (1,000 megawatt hour) of battery capacity can power 1 million homes for an hour, and around 30,000 cars.
Another US company XNRG has established a high temperature lithium-ion factory in Gurugram in India that can produce 240 MWh of battery production capacity. According to a statement by the company, “The factory has begun production of its HT Mobility Smart Telemetry Battery XM 5kWh for rickshaws, e-bikes, e-motorcycles, golf carts, solar and wind farms, and telecom tower UPS.”
Scaling up on the Home Front
India has a slew of players that are scaling up efforts to set up battery manufacturing plants in the country. Exide, a leader in battery production for ICE automobiles, has announced a joint venture with France-based Leclanché to build lithium-ion batteries.
As part of this collaboration, Leclanché is likely to provide access to its technical knowhow and intellectual property for Li-ion cells, modules and battery management systems, while Exide will tap into its vast sales network and brand legacy.
“Another level is the assembly and engineering of the cell itself. So, you have the chemistry of the cell and then you have to put it in a cylindrical can. In this, you can bypass the well-known and established cell companies but you will have to go to their Tier 1 suppliers to source those chemicals. If you look at CATL, LG or any of those cell companies, they also have their own supply chains,” added Nakul.
Further, he shared, “One of the electrodes used in cells is graphite, and India is its largest producer. There is a process that makes it EV-grade and that industry is not there in India, but in China.”
“By assembling cells, you get rid of your dependency on cell suppliers, but Tier 1 suppliers are also in China, who are into processing of these chemicals that go into making each cell. As the market matures and grows, you can also look at Tier 2 suppliers.”
A joint venture called Khanij Bidesh India has been formed between three state-run companies – National Aluminium, Hindustan Copper and Mineral Exploration Corp. – to acquire lithium and cobalt mines overseas, vital to manufacturing of lithium batteries.
Additionally, Amara Raja Batteries, the country’s second-biggest traditional battery maker by value, will build a lithium-ion assembly plant.
What Lies Ahead?
As per the India Energy Storage Alliance, the market for energy storage will rise to more than 300 GWh by 2025. However there are certain caveats.
“The mines where you find raw materials for lithium batteries are mostly found in China. The Chinese have presence at multiple levels of the cell supply chain. Indian companies can build their own cells, chemical companies can get into processing of those metals, but the mining companies would be Chinese. To some level, there will be dependency on China,” concluded Nakul.
(Edited by Anu Choudary)