Lithium-ion Battery Manufacturing Heating Up In India
Interest in electric vehicles (EVs) is getting super hot in India. Having missed out on building its own manufacturing base for solar PV, India seems conscious about not missing the EV opportunity, especially for lithium-ion battery manufacturing (LIB).
Through programs like “Make in India” and by providing special manufacturing zones with infrastructure, connectivity, and cheap power, the country is trying to woo corporates to invest in lithium-ion (Li-ion) battery manufacturing.
How EVs Can Benefit India
If you have been following the developments in EVs, you know that the sector has been expanding at breakneck speed across the globe.
As we speak, in Norway, 60% of all cars sold are either plug-in hybrids or electrics. Denmark has already declared full conversion to electric vehicles by 2025. Meanwhile, in China, sales have grown three-fold over the last year!
EVs are poised to play a significant role in meeting India’s mobility needs, thereby reducing the country’s massive oil import bills.
As per an analysis by the NITI Aayog (National Institution for Transforming India), a policy think tank of Government of India, the country can save over 60% of the anticipated road-based passenger mobility-related energy demand in 2030 by pursuing a shared, electric, and connected mobility future. This would potentially help reduce more than 35% of the carbon emissions from the sector.
At an estimate of $52 per barrel of crude, this would imply a net annual savings of about $60 billion (in 2030).
But Why Focus On Batteries?
That’s easy. It is all about reducing the cost of EVs.
If one looks at the cost breakout of an EV, Li-ion batteries take the biggest chunk. Incentivizing domestic manufacturing of batteries would reduce the overall price of EVs. This in turn would create demand and help accelerate EV adoption.
It is interesting to look at the battery manufacturing stages from a value generation (costs) perspective. The battery chemicals have a value of about 35–40% of the total cost of the battery pack. Cell manufacturing takes 25–30% of the pie. Lastly, cell-to-battery-pack manufacturing leads to value addition of 30–40%.
Among these, currently, India only has cell-to-pack manufacturing (assembly) plants totaling 1 GWh of annual production capacity. The existing OEMs are importing batteries from China, Taiwan, and Korea.
A news article by Firstpost claims that Li-ion battery costs can be reduced by up to 80% if there are bulk orders in larger volumes. It is estimated that India needs a minimum of 10 GWh of cells by 2022, which would need to be expanded to about 50 GWh by 2025. An analysis by C-STEP agrees that at a scale of 50 GWh manufacturing capacity, the cost of a battery is expected to be competitive with global costs.
EV Incentives For Consumers & Manufacturers
The Indian government in its recent budget doled out a slew of benefits to both attract investments into battery manufacturing and also to push the sale of EVs.
The GST rates on EVs have been reduced from 12% to 5%. Additionally, an income tax deduction of ₹150,000 (~$2,200) would be allowed on the interest paid on loans taken to purchase electric vehicles. For manufacturers, government has proposed a custom duty exemption on import of specific components.
This is in addition to ₹100 billion (~$1.5 billion) allocated for EVs under the “Faster Adoption and Manufacturing of Electric Vehicles (FAME II)” scheme, which includes solar storage batteries and charging infrastructure, among other things.
The government is expected to issue tenders inviting companies to set up 50 GWh of Li-ion battery manufacturing in India. This is expected to require $50 billion in investments. A number of state governments are also trying to attract corporates by announcing packaged benefits.
DNA quoted the Managing Director of the Dholera Industrial City Development Limited (Dholera, Gujarat) that the project can offer large land parcels along with cheap electricity, connectivity, and other infrastructure benefits which would be ideal for high-technology and mass production facilities.
Telangana, on the other hand, is pitching a 5 GWh Li-ion battery plant by announcing the availability of 200 acres of land plus power and water for the manufacturing unit at a concessional rate.
Companies In The Foray For Li-ion Battery Manufacturing
A number of corporates have announced their interests publicly to enter into Li-ion battery manufacturing to gain the first-mover advantage in the Indian ecosystem.
Tata Chemicals, part of the Tata Group, has already made an announcement to set up a Li-ion battery unit in Dholera. The company has procured 126 acres of land and will make an investment of ₹40 billion (~$600 million). The plant will start with a capacity of 10 GWh and is later expected to be scaled up to 50 GWh.
Tata Chemicals had earlier entered into a non-exclusive MoU with the Vikram Sarabhai Space Centre of the Indian Space Research Organisation (ISRO) for transfer of the latter’s Li-ion cell technology. ISRO has been using in-house Li-ion batteries to power its satellites and launch vehicles
For sourcing lithium, the company is reportedly looking at business opportunities related to the exploration and import of lithium from Bolivia.
Suzuki Motor Corporation & Toyota Motor Corporation
Japan’s Suzuki Motor Corporation will be setting up a Li-ion battery manufacturing unit in Gujarat. The factory will be built at an investment of $180 million in Hansalpur near Ahmedabad.
The lithium-ion plant is being set up in partnership with Denso (a Toyota unit) and Toshiba and is expected to start production by 2020.
Bharat Heavy Electricals Limited
Bharat Heavy Electricals Limited (BHEL) and Australia-based Libcoin are in a “commercial in confidence” level discussion to build a 1 GWh Li-ion battery plant in India. The (yet to materialize) consortium expects the capacity to be scaled up to 30 GWh in due course.
The developments are a part of BHEL’s diversification initiative to expand in the e-mobility business. The company is also forayed into manufacturing of EV chargers, electric buses, and related components.
BHEL’s partner LIBCOIN is a consortium comprising Magnis Energy, Duggal Family Trust and Charge CCCV(C4V) with a vision to build large lithium-ion battery plants globally.
Adani Group, an integrated infrastructure conglomerate, announced during the Vibrant Gujarat Summit 2019 that it would invest into an “integrated lithium battery manufacturing complex” in Gujarat. The company already owns solar PV manufacturing assets in the region.
The automobile major Mahindra has also indicated that it is open to partnership with a global player keen on setting up a lithium-ion cell manufacturing operations in India. Sometime back, the company had entered into a partnership with LG Chem to develop lithium-ion batteries.
Hyundai, which recently launched its Kona Electric SUV in India, says that it will get into manufacturing only if there is an economy of scale advantage.
Hero MotoCorp, the world’s largest producer of two-wheelers, is said to be evaluating an investment to set up battery pack assembly in India for its brand Hero Electric, so as to localize the components. But nothing has been finalized as yet.
Other Developments In EVs In India
Earlier this year in May, NITI Aayog and some other ministries were reportedly working on a proposal to ban two-wheelers with less than 150cc internal combustion engines, and three-wheelers by 2025 and 2023, respectively. Expectedly, fossil fuel-powered vehicle manufacturers and suppliers have been lobbying for an extension of this deadline on the account of their investments for upgrading to BS-VI emission norms (based on Euro 6 emission standards).
With an eye on the future, however, several Indian firms have also been exploring mining opportunities in Bolivia, which has the largest reserves of lithium.
For now, a large number of the projects in lithium-ion battery manufacturing seem to be coming up in Gujarat. Recently, Gujarat also crossed an installed capacity of 6,200 MW and 2,500 MW in wind and solar energy, respectively. To incentivize its residents, the state has announced a mega program to subsidize 600 MW of rooftop solar systems for its residents. Read more on that here.