As India's electric vehicle sector transitions away from government subsidies toward self-sufficiency, battery manufacturers are implementing innovative strategies and investing in research and development while establishing robust supply chains to ensure sustainable growth in the rapidly evolving market.
27 Nov 2024 | 6680 Views | By Prerna Lidhoo & Amit Vijay M
India's EV market has been like a young sapling in a greenhouse, nurtured under the protective warmth of subsidies that provided the right environment for growth while keeping external challenges at bay. Now, as the glass walls are taken away, can this sapling grow into a resilient tree?
Batteries ...
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India's EV market has been like a young sapling in a greenhouse, nurtured under the protective warmth of subsidies that provided the right environment for growth while keeping external challenges at bay. Now, as the glass walls are taken away, can this sapling grow into a resilient tree?
Batteries are arguably the most critical and fundamental component of the EV ecosystem, and any look at the overall EV market should therefore first begin with battery makers. They can be described as the unsung heroes of this transformation—experimenting with cutting-edge chemistries, bold investments and localised production as they race to make EVs viable in a post-subsidy landscape.
Around the world, countries such as China, US and Europe started the transition earlier than in India, and in some geographies such as China, robust supply chains are already in place. For India to catch up and compete on a global scale, it will require not just a technological shift, but a fundamental reimagining of its role in the global EV race.
As the heart of electric vehicles, batteries will play a pivotal role in the success of this mission. With EV manufacturers focused on achieving economies of scale, the need for reliable, cost-effective, and efficient batteries is set to soar. Domestic battery makers stand to benefit significantly from the growing market, reducing import dependence and improving local supply chains.
According to a report by NITI Aayog and the Rocky Mountain Institute, India's annual battery market could rise to $15 billion by 2030 from the current $1 billion, with almost $12 billion coming from cells and the rest from pack assembly and integration in the "accelerated scenario".
The battery demand in India, it said, is expected to rise to 260 GWh over the same period. To meet this scale of demand, India will require five gigafactories in 2025 and 26 gigafactories by 2030.
Battery makers recognise the importance of building a robust local manufacturing ecosystem that capitalises on India's cost efficiencies and economies of scale, positioning the country as a competitive player in the global market. This approach not only supports domestic needs but also opens doors to export opportunities in the rapidly expanding technology sector.
However, achieving this vision requires the backing of long-term policies that drive sustained demand for batteries across both mobile and stationary applications, ensuring a thriving and resilient industry.
With this in mind, the government has, in recent years, shifted its focus from demand-side incentives to supply-side measures, aiming to strengthen the production ecosystem and drive sustainable growth in the sector. But are the battery makers ready?
Boosting Supply
The government's focus has shifted towards building supply in India's battery manufacturing sector, which is why incentives are gradually being reduced. The introduction of the Production-Linked Incentive (PLI) programme, particularly under the National Programme on Advanced Chemistry Cells (ACC) battery storage, aims to boost manufacturing capacity in the coming years. The production-linked incentive (PLI) programme announced by the government provides a much-needed incentive to boost the manufacturing capacity of batteries in the coming years.
Focusing on supply offers several advantages, including the ability to reduce dependence on imports, strengthen domestic manufacturing capabilities, and drive down costs through economies of scale. It also encourages local innovation and the development of cutting-edge technologies, while positioning India as a competitive player in the global battery market.
Moreover, enhancing supply infrastructure could foster a more resilient, self-sustaining ecosystem, attracting further private investments and creating jobs, all of which are key to sustaining long-term growth in the sector, experts point out. As subsidies on the demand side begin to phase out, industry players will need to align their strategies with supply-side incentives, focusing on innovation and production efficiency rather than relying on subsidies to drive demand.
Under the National programme on ACC (Advanced chemistry cells) battery storage, in 2022, the government approved 30 GWh of battery manufacturing capacity where Ola Electric Mobility was awarded 20 GWh, and Reliance and Rajesh Exports received 5 GWh each. The 2022 auction under the battery PLI scheme was supposed to award 50 GWh to four winners with an outlay of Rs 18,100 crore but 20 GWh of battery making capacity was unawarded.
Half of this unawarded capacity came up for rebidding in the latest round where Reliance got 10 GWh more. Other bidders were ACME Cleantech Solutions, Amara Raja Advanced Cell Technologies, Anvi Power Industries, JSW Neo Energy, Lucas TVS, and Waaree Energies for a cumulative capacity of 70 GWh.
Despite these efforts, India's lithium-ion battery manufacturing capacity is expected to fall short of government targets by 2030, with projections of only 15-20 GWh by 2028, according to a CRISIL report.
While the government envisions achieving 50 GWh of annual Li-ion battery production, the sector faces several challenges, including competition from established global players in China, the need for substantial R&D investments, disruptions from emerging alternative technologies, limited access to raw materials, and uncertainty surrounding the growth of India's EV industry.
CRISIL adds that while government incentives play a vital role, they may not be sufficient to overcome these hurdles and unlock the full potential of the sector.While government incentives have been crucial, they may not be enough to address these obstacles, and a stronger focus on expanding supply chains, technological innovation, and industry collaboration is essential to unlock the sector's full potential.
Battery makers say that the challenge is that the PLI has only been awarded to a few players, while the industry itself is much larger. For the benefits of this scheme to be more widespread, the government should consider extending it to smaller OEMs and battery swapping companies, they say.
This would ensure that the advantages of the scheme are felt across the entire ecosystem. The goal should be to drive investments and reduce manufacturing costs, which in turn would support long-term growth.
If PLI remains limited to a few, it will only benefit those companies and fail to uplift the broader industry. Perhaps a second phase of the PLI could be introduced to include smaller players and OEMs who are also working towards this vision, battery makers say.
PM E Drive Scheme
In a bold push to accelerate India's EV adoption, the government introduced the PM E-DRIVE Scheme with a budget of Rs 10,900 crores over two years. Taking the FAME II scheme forward, it aims to stimulate innovation, build infrastructure and create a robust market for electric vehicles.
The scheme aims to lower costs by fostering domestic production of affordable technologies, such as solid-state batteries, which are expected to become commercially viable over time.
Additionally, advancements in emerging technologies like LFP batteries are being prioritised. This focus on innovation and localised manufacturing aligns with the government's plan to gradually phase out EV subsidies beyond FY26.
For Samrath Singh Kochar, Founder and CEO of Trontek, the PM E-DRIVE Scheme is a step in the right direction. "The scheme is not just about increasing EV numbers," Kochar explains. "It's a strategic move to foster innovation, boost local manufacturing, and position India as a global player in the electric mobility revolution."
But Kochar also sees the bigger picture. "For the domestic battery sector to scale effectively, we need more than just demand. We need comprehensive measures like dedicated battery parks, improved infrastructure, and increased R&D investments to ensure we're competitive globally," he asserts. Kochar believes these steps are crucial to ensuring a sustainable supply chain that supports India's growing battery manufacturing sector.
Kochar also emphasises the need for battery makers to build strategic partnerships with EV manufacturers. "These partnerships will drive technological advancements and ensure that the batteries being produced are not only cost-effective but also cutting-edge in terms of performance and sustainability," Kochar notes.
This collaborative approach, he believes, will be essential to the long-term success of India's EV sector. Despite the positive momentum, Kochar points to a significant challenge: the absence of subsidies for battery manufacturers. "As a battery manufacturer, we do not receive any subsidies or concessions.
Without subsidies which are aimed at promoting EV adoption there will be a dip in sales for EVs. This can impact the battery manufacturers as it will impact battery sales as well. The absence of subsidies might increase pressure on manufacturers to keep costs competitive while managing the high costs of raw materials and R&D. So, I believe this is one challenge that as battery makers we face," he adds.
He believes that with the right ecosystem—one that includes a skilled workforce, clear policies, and strong industry partnerships—India can lead the way in sustainable electric mobility, not just within its borders but on the global stage.
Experts believe that innovation and scale will drive cost savings, which will help in the long run in making subsidies redundant. Randheer Singh, former Director of Electric Mobility at NITI Aayog and founder of automobile consulting firm Forsee Advisors, says that the new scheme not only stimulates demand but also tackles supply-side challenges such as charging infrastructure and testing capabilities.
This dual focus will gradually reduce India's reliance on imports while fostering the development of a globally competitive battery ecosystem. "Over time, this will reduce dependence on imports and assist India in building a globally competitive battery ecosystem. With the structural support provided by this programme, India's battery market won't just survive—it will thrive, as cost savings from scale and innovation replace subsidies," he said.
No clarity for battery swapping
Amid all this, questions remain about equal treatment of different technologies and approaches. According to Chetan Maini, Co-Founder and Chairman of SUN Mobility there needs to be a technology-neutral level playing field for electrification to be successful in India.
End customers should get the same benefit, irrespective of whether they choose solution A or B. "Today the customer gets the subsidy benefit for the one with the battery, and the other case, one without the battery, they don't get that benefit, while the product is the same. The only difference is that they are paying for one over a period of time versus paying for one upfront," he explained.
Calling this "discrimination" illogical, he said that the industry has been very disappointed that this has not been fixed. "The government can make some updates to just clarify because the certification process for the product is identical but there's no process for the end customer to get the subsidy. Today, they've given a two-year policy. Earlier, every time it was like a single year or they would change things halfway through. I think those changes cause more challenges," he adds.
Since the battery costs are coming down, Maini feels that this will lead to volumes going up and the reduction in subsidies will be compensated by the scale advantage. "Two-wheelers and three-wheelers are continuing to grow because the economics are working quite favourably.
There's also a push from the government to add more infrastructure. So, these would sort of continue to sustain growth. Since the OEMs and everyone knows that the subsidies are going to reduce over a period of time, they're internally preparing themselves," he said.
Today, in cities where both swapping and regular charging is available for commercial applications, around 80% is covered by swappable batteries. Battery makers feel that including swappable batteries in demand side incentives will further help boost the industry, especially for commercial applications. "We are always prepared for a subsidy-less era from day one.
Today, our customers don't get subsidies but they are still choosing it over fixed battery solutions. The business should and continues to make sense for the customer and be sustainable for an organisation. We are quite ready for a future which has no subsidies," he adds.
Battery makers point out that subsidies serve a short-term purpose—they help generate initial demand, raise awareness, and reduce the perceived risk for consumers who are hesitant to make the switch. However, they're not a long-term solution for sustainability, and both the government and the industry understand this dynamic.
Another player that is optimistic about the future of Battery-as-a-Service (BaaS) is Battery Smart, which recently achieved the milestone of 100,000 swaps per day. It believes it can thrive without significant reliance on government incentives. "Battery swapping will thrive even without subsidies because it is economically viable at scale, providing consumers with zero downtime and increased earnings. Additionally, the BaaS model reduces customers' upfront costs by 40%, making EV adoption more accessible, regardless of subsidies," Pulkit Khurana, co-founder, Battery Smart said.
Diewakarr Mittal, founder of AOKI, sees immense potential in the battery swapping market, particularly for B2B applications such as logistics, ride-hailing, and public transportation.
While challenges like standardisation have hindered widespread adoption in the B2C segment, Mittal believes battery swapping can be a game-changer for fleet operators, offering reduced downtime and enhanced operational efficiency. "There has to be clear government standards for battery swapping to be successful in both the B2B and B2C segments.
India will need to introduce clear standards that ensure compatibility between different manufacturers and models. Standardisation will be required to create an open ecosystem capable of driving widespread adoption," he said.
Beyond Subsidies
Experts have highlighted that India is yet to achieve large-scale development of indigenous cell technologies, underscoring the urgent need to localise the Li-ion battery supply chain to attain self-sufficiency in cell manufacturing. Achieving this will require moving beyond reliance on subsidies and focusing on long-term strategies for innovation and infrastructure development.
Mahesh Godi, the founder and CEO of Chennai-based lithium-ion cell manufacturer GODI India, says, "For greater self-reliance in cell manufacturing, India needs comprehensive policies that address the entire supply chain for cell manufacturing, beyond just focusing on the cells themselves but providing incentives to the entire supply chain around cell manufacturing and the making of battery packs." He added that key global players like Panasonic, LG Chem, etc. are continuously investing in R&D to improve cell technology, while "India has a long way to go in this regard."
Domestic players like Ola Electric, Amara Raja Energy and Mobility and Exide Industries are making significant strides in India's battery manufacturing sector, backed by substantial investments to drive innovation and expand capacity.
Ola Electric, supported by a Rs 5,500 crore public issue, plans to invest Rs 1,226.43 crore to increase its cell manufacturing capacity from 5 GWh to 6.4 GWh and establish a $500 million Battery Innovation Centre (BIC) in Bangalore, which will be one of the world's largest and most advanced cell R&D facilities.
Meanwhile, Amara Raja Energy is setting up a modern R&D centre in Hyderabad's Aero City over 7 acres, aimed at incubating startups and fostering a collaborative ecosystem. Exide Industries is investing around Rs 1,000 crore in lithium-ion cell manufacturing and battery pack solutions as part of its Rs 5,000 crore project to build its first-phase lithium-ion cell manufacturing capacity.
With these investments, all three companies are not only expanding their manufacturing capabilities but also bolstering their R&D efforts, positioning themselves at the forefront of India's evolving battery ecosystem.
According to Jayadev Galla, Chairman of Amara Raja Energy & Mobility, there are two distinct paths unfolding in the global EV landscape: "In China, the model centres on light mobility, comprising two-wheelers, three-wheelers, and affordable small cars that are competitive with internal combustion engine vehicles. This approach has gained significant traction, with more than 50% of new cars in China being electric. In contrast, the Western market, which includes the US and Europe, focuses on high-performance, luxury vehicles like Teslas, BMWs, and Porsches. While these vehicles offer superior performance, their high cost has created challenges in volume growth," he said. "In India, we see our growth aligning more with the Chinese model."
Amara Raja's primary focus is on transitioning two- and three-wheelers to electric over the next five years, if not longer. The disruptions faced by the West in EV adoption—such as plant cancellations and delayed projects due to demand not meeting production forecasts—highlight the critical importance of leveraging Chinese technology and expertise.
"The company has learned from these setbacks and is now poised to adopt a more sustainable growth model, similar to China's, which we believe will be successful in India," he said. He added that subsidies will eventually taper off and the industry will have to figure out a way to sustain itself in a scenario like that.
Experts say that as EV subsidies begin to decline, battery makers will need to adapt by focusing on improving efficiency and scaling up production to stay competitive. With less reliance on government incentives, the industry will shift towards optimising cost structures, reducing reliance on imported materials, and investing in advanced manufacturing technologies to lower production costs.
Innovations in battery technologies, such as solid-state and LFP batteries, will also play a key role in driving down prices and improving performance. Additionally, fostering strategic partnerships with EV manufacturers and supply chain players will enable battery makers to enhance their value proposition and secure long-term contracts.