Can India ramp up battery cell manufacturing to meet EV goals?

Country imports almost 70% of its lithium-ion cell requirements from China and Hong Kong

EV Expo and Green Energy Summit 2022 in Bengaluru. India may need to invest more than $10 billion in cell manufacturing by 2030 to meet its electric requirements. EPA
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Indian companies are increasingly exploring opportunities to set up battery cell manufacturing operations to meet demand for components of electric vehicles (EVs).

The South Asian country is aiming for 30 per cent of private car sales and 80 per cent of two-wheelers to be electric by 2030, in an attempt to reduce carbon emissions and its dependence on consumption of costly crude oil imports.

As India scales up its EV manufacturing to meet these goals, demand for cells for the lithium-ion batteries used in EVs is rising. The country currently imports almost all of these cells, a factor analysts say is holding back the sector.

“We are continuously evaluating the possibility to get into cell manufacturing,” says Anand Kabra, vice chairman and managing director of Kabra Extrusiontechnik, which manufactures batteries for EVs at its Battrixx division.

The company’s plant, based outside the city of Pune, is focused on manufacturing of batteries for two- and three-wheeler vehicles, the cells for which are largely imported from China.

Electric vehicles are gaining significant traction in India, according to a report by consultancy Arthur D Little (ADL).

“However, for EV batteries, India remains largely dependent on imported lithium-ion cells owing to limited local manufacturing capacity and a scarcity of raw materials,” the report says.

India imports almost 70 per cent of its lithium-ion cell requirements from China and Hong Kong, but it will become critical for the country to produce cells locally as demand grows, the report adds.

India’s lithium-ion battery demand currently stands at 3 gigawatt hours (GWh), and it is set to rise to 20 GWh by 2026 and 70 GWh by 2030, according to ADL.

The consultancy projects that India will need to invest more than $10 billion into cell manufacturing by 2030 to meet its requirements.

“As in today’s scenario, if the cells are imported then the bill will skyrocket a few billion dollars and this is going to be critical,” says Venkat Rajaraman, chief executive and founder of Indian EV battery manufacturer Cygni Energy.

The Telangana-based company is setting up a gigafactory in Hyderabad for battery pack manufacturing, to produce 40,000 packs a month.

A battery makes up almost 40 per cent of the cost of an EV. Importing cells increases manufacturing expenses, the price of vehicles — a major factor in deterring potential buyers — and makes the EV industry vulnerable to global supply chain disruptions, the ADL report says.

“If we stay import-dependent, the cost of the vehicles will continue to remain high,” says Raj Mehta, founder of Greta Electric Scooters, a manufacturer of electric two-wheelers.

“Bringing down the battery cost will drastically help bring down EV costs.”

There are also other factors holding back the growth of India’s EV market, including a lack of charging infrastructure.

“In the global context, the current e-mobility picture in India does not look very promising,” according to ADL.

“The country is far behind in EV adoption compared to some of the western markets. India’s EV dream faces a multitude of challenges, and high import dependence for lithium-ion cells is the most significant one.”

The transition to electric vehicles is crucial for India, the world’s third-largest carbon emitter, which aims to achieve net-zero emissions by 2070.

“Because cells are the most critical part the of e-mobility value chain, over-dependence on imports is a barrier for the growth of India’s EV industry,” the ADL report says.

"There have been recent developments in local industry with some of the original equipment manufacturers, traditional battery players and New-Age technology-led start-ups venturing into cell and battery manufacturing."

In March, Indian battery manufacturer Exide Industries said it had partnered with China’s SVOLT Energy Technology to make lithium-ion cells locally.

Companies including Exide, Reliance Industries and Ola Electric Mobility have applied for incentives under India’s $2.2bn advanced chemistry cell scheme, which aims to attract local and global investors.

Bengaluru-based nano-technology company Log9 Materials, which makes battery packs for EVs, is also venturing into cell manufacturing.

“As of now, our cell [manufacturing] is a pilot line, whereas the battery pack is a commercial line,” says Kartik Hajela, chief operating officer and co-founder at Log9 Materials, adding that the company’s focus is on producing fast-charging batteries.

Log9 Materials started manufacturing batteries last year and produces about 400 battery packs a month. The company plans to increase monthly production to 1,000 battery packs by the end of the current financial year, which runs until March 31.

“We’re reliant on countries like China, which definitely had a first-mover advantage in this space in terms of manufacturing cells, and hence all of us have been on that path of importing those cells,” says Mr Hajela.

“But now, it’s a sunrise sector in India, if you see the way the adoption is happening.”

Initially, Log9 Materials plans to meet its own needs with the cells it produces, before looking at supplying to other companies.

“There are two reasons why we wanted and why anyone would want to make cells indigenously — one would be cost for sure, and the other would be control on quality,” Mr Hajela says.

“It’s just a matter of time within which we’ll see multiples of these manufacturing units mushrooming in India.”

However, the number of plants and companies entering the sector will be limited by the fact that it is a very capital intensive business, he adds.

“Now I feel the demand is there, there is no such challenge apart from capital and getting these manufacturing cells to be started,” says Mr Hajela.

Meanwhile, a major factor holding back Battrixx from making the leap into cell manufacturing is the rapid evolvement of technology, says Mr Kabra. The challenge remains “to decide which is going to be the future technology”.

“If you look at the next 10 years timeline of how the chemistry in lithium-ion are going to evolve, there’s going to be a very significant change in terms of the anode material, the cathode material and the electrolyte, as well as the basic chemistry itself,” he says.

Another challenge is securing raw materials required to make cells, including lithium, nickel and cobalt, which are available from a limited number of countries.

To access these materials, recycling will be key, according to industry experts.

“Currently, India has billions of mobile phones and millions of electronic gadgets, and with the electric vehicle proliferation, lithium recycling, which is also called urban mining, is getting very popular,” says Cygni Energy’s Mr Rajaraman.

Tata AutoComp, which is in a joint venture with China’s Gotion Hi-Tech to manufacture battery packs, says it has steadily moved towards manufacturing more of the parts, rather than simply assembling imported components.

“Over the past couple of years, we have focused on localising most of the ‘child’ parts,” a representative of the company, which is part of the conglomerate Tata Sons, tells The National.

“Today, except for the cells and the battery management system, which we import from our partner, we have localised the components like the battery tray and cover, cell and module carriers, bus bars, cooling tubes as well as wiring harness. Many of these parts are made within Tata AutoComp group companies.”

As the Indian government promotes the adoption of EVs, Tata AutoComp has come up with several policies and incentives to facilitate the growth of the industry, the company says.

“Batteries are key to meeting the objective of this EV push and, therefore, many business groups are evaluating setting up cell manufacturing facilities in India,” it adds.

“Tata Sons is evaluating setting up a cell manufacturing facility. Once set up, Tata AutoComp will have the liberty of sourcing cells from this entity.”

It is still early days for India when it comes to cell manufacturing, but once it takes off, it would help the country to accelerate its EV ambitions.

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Updated: October 10, 2022, 4:00 AM