Manufacturing Batteries for Electric Vehicles in India: A Case for Make in India?

The Government of India (GoI) kicked off its Electric Vehicle (EV) drive over two years back with much zeal and vigor. However over time on back of ambiguous policy-making, industry pushback and a palpable slowdown in the auto sector at-large, the momentum for ubiquitous “mass market” adoption has somewhat mellowed.

 

This shouldn’t come as a surprise since such expectations would naturally come across as elusive unless a concrete policy framework, significant tech value-addition from manufacturers backed by robust and reliable infrastructure emerges.

 

LOSING STEAM

 

Now while much has been said on a lack of charging station penetration and EVs total cost of ownership (TCO, that is, the cost of owning the vehicle plus cost of maintenance and charging) acting as a deterrent (the latter being true at least in the passenger segment if not in the commercial space which to be fair also depends heavily on government subsidies and financial engineering for their unit economics to work), an aspect that is often overlooked is the batteries themselves.

 

Batteries are of singular significance within the EV value chain...For instance a lithium-ion battery (LIB) on average accounts for almost 40% of the EV’s manufacturing cost base.

 

DIGGING DEEPER

 

Here’s a quick look at the typical value chain for battery manufacturing:

 

Manufacturing Batteries for Electric Vehicles in India: A Case for Make in India

 

In the first step, a myriad of raw and processed materials, including cobalt, natural graphite, silicon metal and lithium are used to produce various cell components - anode, cathode, binder, electrolyte and separator. These components are then assembled into individual “cells”. Subsequently, individual cells are configured into larger modules. These modules are next installed with systems that manage power, charging and temperature. Following this, the battery pack is integrated into the vehicle structure along with the battery-car interface (connectors, plugs, mounts).

 

India at present, primarily figures in the pack assembly onwards value chain. The country is mostly dependent on Chinese imports for manufactured cell components & modules. In fact, according to an analysis by BloombergNEF, in early 2019 there were 316 gigawatt-hours (GWh) of global lithium cell manufacturing capacity. China is home to 73% of this capacity, followed by the US, far behind in second place with 12% of global capacity. Considering raw materials alone comprise almost 60% of the finished battery pack, a lack of indigenization there obviously implies margin dilution for OEMs and exposure to out-of-control geopolitical forces, like what the country faces in case of crude oil imports.  

 

Manufacturing Batteries for Electric Vehicles in India: A Case for Make in India

 

WHEREIN LIES THE PROBLEM? WHY CAN'T WE MAKE IN INDIA?

 

A battery used in a typical EV consists of hundreds of large lithium-ion cells that use metals like lithium, cobalt, nickel and manganese. The problem however, is that there are only limited reserves of lithium and cobalt. 65% of lithium reserves are in Bolivia and Chile, while 60% of cobalt reserves are in Congo. A skewed supply demand ratio ensures that costs remain high.

 

Interestingly, Chinese state-owned firms have been securing lithium mine concessions in countries such as Bolivia, Argentina and Chile for years now. Their formative control on the global supply chain is clear, considering they are responsible for 63% of lithium’s global demand.

 

Now that we have established the importance of manufacturing LIB indigenously, let us have a look at some of the key strategic challenges at play.

 

ROADBLOCKS

 

To begin with, the occurrences of Li ores (lepidolite, pegmatite, spodumene and hiddenite) in India is low and concentrated in a few locations such as the Bihar mica belt, areas of south Chhattisgarh and Karnataka. To this effect, the government can begin with scanning for these resources within the country, while incentivizing strategic investments in international mines for these materials. Additionally, over time, India would also need to secure other materials used in LIB including cobalt, nickel, manganese, and graphite.

 

Yet another vital task would be setting up of a robust LIB recycling industry. Furthermore, the government could also allow import of used Lithium-ion batteries for recycling as suggested by this NITI Aayog report.

 

India lacks high quality R&D infrastructure to identify emerging, high performance LIB variants. A robust R&D support can bring down the battery cost, enhance capacity as well as prolong its life cycle.

 

However, one must not discredit the fact that building battery manufacturing units is no mean task. It involves numerous financial, logistical and technological challenges. To put things into perspective, the Tesla Gigafactory at Sparks Nevada, which has an annual capacity for 35 gigawatt-hours (GWh) — one GWh being the equivalent of generating (or consuming) 1 billion watts for one hour - nearly as much as the entire world’s current battery production combined, occupies nearly 4.9 million square feet across several floors and costed over $5bn

 

To address this, early plants can be set-up either by international manufacturers or as joint ventures between Indian companies and international manufacturers.

 

These measures, when coupled with better optimisation of manufacturing plants and implementation of government subsidies and tax incentives can significantly reduce the cost of LIB in the future.

 

LESSONS FROM OVERSEAS

 

The strategic importance of battery technology to EV is increasingly being recognised and countries across the globe have adopted policy measures to further battery manufacturing.

 

For instance, in China, policy support aims to kindle innovation and induce consolidation among battery manufacturers, giving preference to those that offer batteries with the best performance.

 

The European Union in 2018 adopted the Strategic Action Plan for Batteries in Europe to build a robust battery value chain, including extraction of raw materials, sourcing, processing, battery systems, reusing and recycling.

 

Needless to say, India could benefit much from taking a leaf out of these instances.

 

 

RECENT DEVELOPMENTS

 

The government earlier this year launched the National Mission on Transformative Mobility and Battery Storage to formulate and launch a Phased Manufacturing Program (PMP) to localize production across the entire EV value chain. It also recently approved a subsidy plan of INR700cr to subsidise manufacturing of batteries for electric vehicles and mobile phones, which shall now be sent to the cabinet for its approval.

 

As per this NITI Aayog report, in addition to the currently available Lithium-ion chemistries, future developments in battery chemistry may yield a new generation of batteries which will include ‘solid state’ batteries that promise a storage capacity of about 1000 Wh/kg and 80% charge in about 10 minutes.

 

As indigenous manufacturing gathers paces, it is likely to bring down the cost of batteries to $76, or about Rs 5,450, per kilowatt hour (kWh) from $276, or about Rs 19,800, per kWh – thereby bringing down the cost of EVs at par with combustion engine vehicles in the next 3-4 years.

FIN.

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