Establishing economies at scale and achieving price parity will become critical factors in lowering the cost of EVs and driving penetration. Moreover, locating cell manufacturers close to the original equipment manufacturers (OEM) would allow for the creation of an encouraging research and innovation ecosystem, which would aid the development of batteries with improved energy efficiency and which are better suited to Indian climatic conditions.
According to Mr Shamsher Dewan, Senior VP & Group Head – Corporate Ratings, ICRA, “In EVs, advanced chemistry in batteries will remain the most critical and the costliest component, accounting for almost 35-40% of the vehicle price. At present, battery cells are not manufactured in India, and thus most OEMs rely on imports, and manufacturing operations in India are limited to the assembly of battery packs. However, to achieve mass-scale penetration of EVs and a competitive cost structure, India will need to create its own eco-system for developing battery cells locally. Multiple challenges exist on the road to the establishment of a cell manufacturing ecosystem, the primary ones being technology complexity, high capital intensity and raw material availability. The ability of battery manufacturers to enter into agreements/alliances with players across the value chain to mitigate these risks, coupled with the creation of a robust framework for recycling would remain key.”
To keep up with the anticipated surge in demand for battery cells and packs, the government of India has recently signed agreements with three companies for incentives under its Production-Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC) Battery Storage. These companies are Reliance New Energy Limited, Ola Electric Mobility Private Limited and Rajesh Exports Limited. These companies are set to receive incentives worth Rs 18,100 crore under the program.
ICRA estimates that EV battery demand in India will go up to 15GWh by 2025 and 60GWh by 2030. In terms of battery chemistry of choice, lithium-ion batteries have emerged as the battery of choice for EVs, given their high energy efficiency, decent thermal stability and low self-discharge. Another promising battery cell is the Lithium Iron Phosphate (LFP) chemistry, which is expected to gain increased acceptance going forward, given its higher thermal stability and lower production cost.