• Demand for Li-ion to skyrocket globally
  • According to Shanghai Nonferrous Metals Network (SMM) prices, as of July 2, the average price of Lithium concentrate was $735/ ton, up 76% from the beginning of the year, and expected to touch $1200/ ton soon. 

 India is on the threshold of a new revolution. This time, it is in the field of automobiles with electric vehicles (EVs) becoming the flavor of the nation. In the last two years, there has been a stupendous growth in the number of two and three wheeler EVs on India’s roads. And now almost all car makers are nursing EV dreams. The government is also looking at setting targets of converting a significant number of vehicles on Indian roads to EVs in less than a decade.

 There is one common thread that binds all these dreams. Lithium ion batteries, which will power all these EVs. Lithium ion batteries are the most important part of EVs accounting for almost 50 per cent of the cost of the EV. 

 Increasingly, automobile companies are proclaiming lithium ion batteries as the future of automobile energy. This is because of the inherent advantages that a lithium ion battery has. Consider this: lithium ion batteries weigh much less than other rechargeable batteries and hold their change extremely well while the energy output from these batteries remains fairly consistent. Apart from this, they can handle hundreds of charge and discharge cycles.

 According to conservative estimates, the market for EV batteries is expected to increase to $300 billion by 2030 including a secondary market of more than 2.5 million e-rickshaws. As such, there is a lot of activity on lithium ion batteries in India to feed the burgeoning growth of EVs on Indian roads.

 The government’s Vision 2030 aims to achieve 100 per cent electrification of public transport and 40 per cent of personal mobility by 2030. This can only happen if there is an adequate availability of lithium ion batteries in the country. While the government is announcing measures to promote lithium ion batteries, what is required is for the government to augment lithium ion battery supplies by incentivizing private sector players to produce more and increase lithium ion supplies in the country. Once the volume game is played, costs will come down and make the lithium ion cost ratio in EVs more favourable. 

 The biggest challenge is that India does not have manufacturing capability for lithium ion cells. India’s entire feed of lithium ion cells is imported from China and Taiwan and assembled into batteries locally. China arguably has the world’s largest capability of lithium ion cell manufacture despite not having adequate sources of lithium and cobalt –raw materials for lithium ion batteries—and imports them from various countries like Bolivia.

 There is thus, a huge potential for India, where demand and population of EVs is growing by leaps and bounds, to get into lithium ion cell manufacture by importing lithium and cobalt. Where China gains is their domestic EV demand which is already the largest in the world. 

 According to the data of China Association of Automobile Manufacturers, the domestic production and sales of new energy vehicles were completed in May this year 217,000 units, an increase of 1.5 times and 1.6 times respectively.  From January to May, production and sales of new energy vehicles reached 967,000 and 950,000 units, respectively, a year-on-year increase of 2.2 times.

 Currently, Lithium is in short supply.  Huachuang Securities pointed out that the shortage pattern of Lithium concentrate will not change, and the price of Lithium Hydroxide is firm. In short and medium term, there is still a gap in the supply of Lithium, the high growth of Lithium salt supply is not sustainable, and the rising trend of Lithium price will not change.

 According to Shanghai Nonferrous Metals Network (SMM) prices, as of July 2, the average price of Lithium concentrate was $735/ ton, up 76% from the beginning of the year, and expected to touch $1200/ ton soon. 

 And despite its world leading lithium ion cell manufacturing capabilities, even China is not able to cope up with the demand for lithium ion cells for its domestic market and exports. As a result, all Indian battery players, who import cells from China, are struggling to get lithium ion cells for buses, three and two wheelers and cars.

 However, India has an inherent advantage when it comes to lithium ion batteries. India is world class in assembling and in Battery Management System (BMS) capabilities. Assembly cost is cheaper in India. BMS uses computer technology and is all software driven where India can do better. Once lithium ion cell manufacture begins in India, it can provide a huge advantage over other countries with India’s advanced software capabilities.

 

India also has local service and local technology and support which will help Indian manufacturers scale better than international manufacturers. Also costs will be less for Indian manufacturers as duties will be less because of government exemptions and subsidies. These benefits tilt the scales in favour of Indian battery makers as against international players.

 

This is just the beginning for India. The present model is yet to mature and will take time as there will be adjustments based on user cases. The next stage would be better design of lithium ion based on Indian conditions, customized towards Indian usage. Every country has its own learning curve and batteries have to be designed according to the local temperatures. Companies are also experimenting to arrive at the model best suited for India. Some companies like Hero Motors has tied up upfront with Gogoro of Taiwan for battery swapping technology. Others are talking about standardization. But these may be a bit distant from becoming the norm.

 The next few years are both interesting and crucial for the future of Indian lithium ion batteries sector. With the government extending the Faster Adoption and Manufacturing of Hybrid and Electric vehicle (FAME) scheme by two years to March 31, 2024, increasing the subsidy to 1.5x for E2W, the sector will get a boost. Plus, to promote lithium ion batteries, the government has also allowed FAME subsidies only for lithium ion batteries. The same treatment is being given for state subsidies.

 Apart from this, in May this year, the government approved the Production Linked Incentive (PLI) scheme for ‘National Programme on Advanced Chemistry Cell ACC battery storage’ for a financial outlay of Rs.18,100 crore over a period of five years.

 These will help India’s corporate sector move faster towards lithium ion battery manufacture and help India realise its dream of not just becoming a major EV nation but a leading manufacturer of lithium ion batteries as well.

 

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Views expressed above are the author's own.

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