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Charging India’s Future: FAME II’s Impact on domestic lithium-ion manufacturing

The electric vehicle (EV) market in India is currently exhibiting potential for significant growth. While India is still in the infancy of EV adoption, eventually it is set to adopt EVs in various modes of transportation. While there are limited choices for consumers in currently, rapid succession of complimentary initiatives in battery manufacturing and storage, charging infrastructure along with new entrants in the market can shift change the e-mobility landscape in the near future. 

The Indian automobile sector leaders have showcased upcoming EV models which can hit the roads in the near future with companies like Nissan, Renault, Tata and Hyundai set to release EVs in the 4W segment this year. With changes in technology as well as the clear vision set by the Indian government, IESA estimates that over 70 million EVs could be sold till 2030. This transition of the transportation sector from petroleum based internal combustion engines (ICEs) to electric battery operated engines can create a market for 750 GWh of advanced energy storage solutions over the next decade.

In the long run, the expansion in the type of EV products on offer is likely to offset to slow uptick in EV sales in the short term. Recently, electric two-wheeler maker Okinawa Scooters received regulatory approvals for two models, making it eligible for subsidy under the government's FAME-II scheme. The company received a certificate of eligibility from Automotive Research Association of India (ARAI) for Okinawa i-Praise and Okinawa Ridge+, each with lithium-ion battery components.  Additionally, Ather Energy also received approval for a FAME II subsidy for its Ather 450 e-scooter.

Potential challenges in localization under FAME II can be overcome if battery manufacturing is targeted

Batteries are a critical component for EVs and currently there exists a large gap in that little to no Li-ion cell manufacturing capacity in India at present. At the same time, there is a big gap in the commercialization of innovative lithium-ion technology, as well as, linking R&D to the needs of the industry.

Hence, most of the local manufacturing companies interested in setting up Li-ion cell manufacturing plants in India resort to licensing technologies from counties like Korea, Japan, China, Germany, the US, Canada, the UK or Australia.  A similar is observed in the lead acid industry, where leading lead acid providers have traditionally licensed intellectual property from US, Japanese or Chinese companies. R&D in some of the key areas for electric vehicles including battery performance, power electronics devices, advanced e-vehicles testing, battery testing etc. should be encouraged. IESA is working closely with the Department of Science & Technology (DST) on advanced energy storage research by bridging the gap between national labs and industry players. Similarly, for charging or swapping stations, we need various components that are currently being imported.

There is a huge opportunity for local tool and component makers to design and manufacture in India; local component suppliers currently engaged in supplying components to the auto industry have an opportunity to diversify into  component manufacturing for EVs. Currently, India has 1 GWh Li-Ion assembling capacity and an additional 4-5 institutions are in discussions to install cell manufacturing facilities in the next 2-3 years. Current cost of a Li-ion battery pack is between USD 250-350 per KWh as compared to USD 1000 per kWh in 2011. Li-ion battery accounts for 40-50% of the overall cost and, thus is the most expensive component of an EV. Indigenous manufacturing can bring down the cost of Li-ion battery and therefore lower the cost of EVs. All major OEMs in India currently import batteries from China, Taiwan and Korea. Various Indian companies have already entered into cell-to-pack assembly however there remains a huge opportunity in India for Li-Ion cell manufacturing.

Under the Phased Manufacturing Program the basic custom duty on various EV components ranges from 0% to 25% which is set to increase in the near future. This is intended to promote indigenous manufacturing and assembly of EVs. An MOU signed between India and Bolivia will also play a vital role in the Indian energy sector by boosting indigenous manufacturing in the next decade. Under the National Mission on Transformative Mobility & Battery Storage, the Central Government is planning to incentivize 50 GWh Cell manufacturing in India.

An increasing number of private companies are becoming proactive in the domestic EV market

Currently more than 20 Indian companies are in discussions for setting up ell manufacturing in India. Indian Institutions like Indian Space Research Organization (ISRO) and Central Electro Chemical Research Institute (CECRI) have already indigenously developed Li-ion cells for energy storage in electric vehicle and grid scale RE-integration projects. ISRO already shortlisted 10 companies for cell manufacturing technology transfer. Additionally, a number of IITs and national research labs have been working on research in the area of Li-ion batteries.

Leading lead acid manufacturers like EXIDE, Amara Raja, Okaya and Li- Guard have also taken the first step by investing in advanced energy storage space. Exide Industries Ltd and Leclanche have formed a Joint Venture (JV) to build lithium-ion batteries and provide energy storage systems for India’s electric vehicle (EV) market and grid-based applications. Similarly, Amara Raja is planning to invest in Li-ion cell manufacturing in Andhra Pradesh. Other small and medium scale lead acid manufacturers are making significant investments in R&D to advance lead acid technology and other emerging battery chemistries like sodium-based, flow batteries, zinc-based batteries, etc. 

Furthermore, global companies are primed for entry into the Indian market while Indian conglomerates are looking to diversify in the EV space.  KIA Motors has already invested USD 2bn in Anantapur, Andhra Pradesh. Mahindra and Tata Motors have also launched 4-Wheeler EVs in India while others are preparing to enter the race. TECO Electric will be investing about USD 50 million (approximately Rs 356 crore) in Devanahalli, Karnataka for the first phase of a project for developing engines for EVs.  

Phased Manufacturing Program will help diversify the EV industry

Electric vehicles are witnessing growing demand which will help in reducing the cost of batteries in the coming years. With appropriate policy support through the Phased Manufacturing Program (PMP), Indian companies now have the opportunity to diversify into the energy storage business. Through this initiative, India will able to compete in li-ion manufacturing  with countries like China, Australia, Germany, USA, Taiwan, South Korea.  PMP incentivizes local manufacturing in both the SMEs and large industry sectors

IESA is also undertaking global business partnerships drive in USA, China & Germany to welcome international players to consider India as their global manufacturing for lithium-ion battery manufacturing.

Debi Prasad Dash works at India Energy Storage Alliance (IESA) for Customized Energy Solutions. He is involved in policy recommendations for the energy storage roadmap for India, manufacturing policy for advanced energy storage technologies and development of ancillary markets in India.