Towards an Electric Future

For India to become a manufacturing hub for EV Cells, we need a long-term strategic roadmap.

As experts commented, “Transportation is tran- sforming, and we need to get ready,” little did policymakers, entrepreneurs, and OEM suppliers in India know how electric vehicles were to change the entire outlook for the Automobile industry in the next decade.

As the Indian Government has placed itself firmly in the driving seat to usher in the revolution of Electric Vehicles (EV) by planning to become a 100 percent ‘Electric Vehicle Nation’ by 2030, it is necessary to look objectively into manufacturing costs and the viability of the target. As EV cells constitute 60 to 70 percent of the total cost of EVs, it is pertinent that the Government sets a clear roadmap for manufacturing lithium-ion (Li-ion) batteries.

Importing the batteries for EVs definitely makes the product costlier in the Indian market compared to conventional internal combustion engine (ICE) vehicles, or what we call petrol vehicles. However, manufacturing these cells in India would be cost-effective only when it catches up to the scale in the other Li-ion cell anufacturing countries. And here comes the catch – despite multiple policy and strategic interventions by the Government, India suffers from structural issues that it has to address before being able to become a production hub for Li-ion cells.

The structural roadblocks

Firstly, we have started late. The Government’s initial plans, way back in 2015 when the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) India Scheme was launched, failed to address the Manufacturing industry related to EV components. Instead, the plan incentivized and concentrated on EV manufacturing and adoption by addressing the issue of EV charging stations. As a result, Phase II of the scheme, which was supposed to end in March this year, has now been extended until 2024.

Secondly, while policies have been introduced for setting up manufacturing units, there is nothing on the expenditure side for research and design. We must recognize that capital investment for cell manufacturing facilities is huge. A typical Gigafactory will need `1,100 to 1,200 crore of investment to start. And given the nascent stage of battery manufacturing know-how, the gestation period will be the next decade — even with technology transfer and ensured investment from big players.

Thirdly, access to raw materials for manufacturing Li-ion batteries is a raging issue. As a study by European Commission 2020 showed, except for manganese and graphite, all the other raw materials are hardly available in India. We will have to keep importing from Australia, China, Brazil, Africa, and Canada for raw materials like bauxite, cobalt, manganese, and natural graphite, apart from lithium. In February 2020, Union Minister Harsh Vardhan informed the Lok Sabha that India imported 450.3 million Li-ion batteries in the April-November period of the financial year 2019-20, valued at US$929.26 million (over `7,200 crore). As per the data by the Ministry of Road Transport & Highways (MoRTH), the number of EVs registered in 2021-22 has grown by 218 percent from 1,34,853 in 2020-21 to 4,29,301 in 2021-22. We have to see how much the economics of scale for import cost of raw materials versus manufacturing Li-ion batteries and the investment is required to make the first Gigafactory operational.

How can we address it?

However, none of the problems is insurmountable if the stakeholders involved in making EVs a reality in India are ready to join hands, plan long-term, and are dedicated to the cause.

The Government, in 2021, introduced a `18,100 crore Production Linked Incentive (PLI) scheme for Advanced Chemistry Cell (ACC) battery storage, with a total manufacturing capacity of 50 GigaWatt Hour (GWh). Subsequently, four players, i.e., Reliance New Energy Solar, Ola Electric, Hyundai Global Motors, and Rajesh Exports, were shortlisted. As per a 2018 research report by the Center for Study of Science, Technology and Policy (CSTEP), a plant of this scale is estimated to cost around `30,000 crore (US$4.6 billion) with a timeline of about three years to become operational.

By 2030, the market for electric vehicle power packs is expected to reach US$300 billion, with a large secondary market of more than 2.5 million e-rickshaws and 4,00,000 lead-acid battery-powered two-wheelers now on the road. India would require a minimum of 10 GWh of Li-ion cells by 2022, according to Government projections. By 2025, it will be around 60 GWh, and by 2030, it will be around 120 GWh.

Thus, even when the project becomes operational, EV manufacturing will need a lot of handholding and support to become viable. Most importantly, it will take a lot of patience to see the EV market mature with sustainable domestic OEM supplies.

Along with consistent policy support, availability, and affordability of capital for OEMs, battery manufacturers, charge point operators, and end consumers would be vital in determining the pace, efficiency, and cost of India's transition in the transportation industry.

A sustainable future

According to a study by CEEW Centre for Energy Finance (CEEW-CEF), an initiative of the think tank the Council on Energy, Environment, and Water (CEEW), the cumulative EV sales in all vehicle segments could cross over 100 million units by FY30, 200 times its current market size, as by the end of March 2020, the total number of registered EVs in India stood at only half a million.

The study also pointed out that to realize the 2030 ambition of India, the country would need an estimated annual battery capacity of 158 GWh by FY30, thereby presenting a massive market opportunity for domestic manufacturers. Also, the EV market will be worth around `14.42 lakh crore, with a need for cumulative investment worth around `12.50 lakh crore for the same.

The planning, investment, and long-term roadmap are worthwhile for the sustainable future that an EV-led transport system could create. As Carlos Ghosn, the ex-Nissan CEO, mentioned, “Electric Cars are not going to take the market by storm, but they are going to be a gradual improvement.” In the same way, the Indian market cannot hurry to make EVs a reality.

Along with consistent policy support, availability, and affordability of capital for OEMs, battery manufacturers, charge point operators, and end consumers would be vital in determining the pace, efficiency, and cost of India's transition in the transportation industry.

Once underway, the indigenous batteries can ensure a sustained supply to the EVs, irrespective of global conflicts. The batteries will be more suited to Indian temperatures and geographical disparities through designs and research. While it is accepted that EVs will benefit the environment, in the long run, with the right technology, over 90 percent of Li-ion batteries can be extracted and reused, thus leading to a recycling of the e-waste being generated.

Most importantly, India is projected to save over `1 lakh crore annually in crude oil imports with increased EV penetration, as per the CEEW report of 2020.
A sustainable future will need planning and a detailed roadmap to see the positive results that we are planning for.

India is roughly late by 15 years in the research and development of EVs and related OEM technology. However, persistence and clarity, in this case, will surely pave the way for a better future.

Founder, Natural Battery Technologies

Source: Magic Wand Media

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