Managing upstream manufacturing costs critical to domestic cell manufacturing
1 GWh of cell manufacturing requires an investment of Rs 500-Rs 600 crore.
Even as the government of India’s PLI scheme for advanced chemistry cell (ACC) has evinced investment interest of over Rs 45,000 crore in India’s local cell manufacturing, the sector still has a long way to go, as it faces issues of supply chain, high costs, and raw material scarcity.
For India's cell manufacturing plans to see fruition, managing upstream supply chain manufacturing costs will play a critical role for India's cell manufacturing plans.
As per ICRA's latest 'Automotive Trends and Outlook' update, India's cell manufacturing ambitions are hampered by a high capital-intensive nature, with 1 GWh of cell manufacturing requiring an investment of Rs 500 to 600 crore.
Srikumar Krishnamurthy, Senior Vice President, and Co-Group Head, Corporate Ratings, ICRA said, "Domestic players will have to increase their technology tie-ups and will have to be robust in the larger challenge of sourcing minerals. India has yet to develop a track record on the supply chain.”
Challenges in India's cell manufacturing journey
An independent study published by the Council on Energy, Environment, and Water (CEEW) states that India needs to invest Rs 33,750 crore ($4.5 billion) to meet the government's PLI target.
Management consulting firm Arthur D Little is of the opinion that to meet local demand for Li-ion batteries by 2030, India will require an estimated $10 billion in investments in cell manufacturing capacity, with additional investments in raw material refining capacity.
Whereas India is set to benefit from the recent lithium reserves found in J&K and wean off import dependence on China, it still has a long road before this can be achieved, underscoring the importance of managing upstream supply chain costs.
"Due to the sluggish supply chain and limited access to materials, the majority of material processing is still done outside India, India must own the majority of the ecosystem " ICRA stated during a media conference call.
According to the Ministry of Mines, India currently imports nearly 70 percent of its Li-ion cell requirements from China and Hong Kong, as cells are the most critical component of the e-mobility value chain.
The country will need up to 903 GWh of energy storage to decarbonise its mobility and power sectors by 2030, with lithium-ion batteries meeting the majority of this demand, as per CEEW's estimates.
To encourage local production, the Government of India has selected three bidders Reliance New Energy Limited, Ola Electric Mobility Private Limited, and Rajesh Exports Limited, for the Production Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC) Battery Storage. Other corporates such as Tata Group, Mahindra, Amar Raja, and Exide have also evinced interest in setting up cell manufacturing facilities.
India's battery manufacturing challenges
Demand for India's li-ion batteries, which is currently at 3 GWh is growing to 20 GWh by 2026 and 70 GWh by 2030, Arthur D. Little has indicated in its report.
Currently, Indian OEMs and customers need to pay higher prices because batteries account for 40 percent of total EV costs, making the Indian EV industry highly vulnerable to global supply chain disruptions.
In their assessment of the progress of cell manufacturing, Barnik Chitran Maitra, Managing Partner of Arthur D Little India said, “Localising the Li-ion battery supply chain is critical to India's ambition of becoming self-sufficient in cell manufacturing and establishing itself as a significant global Li-ion battery manufacturer and exporter."
China's edge In global EV Supply Chain
In the last 10 years, China has emerged as a dominant player in e-mobility and also has a stronghold on the control of critical raw materials such as lithium. Krishnamurthy says, "While China is one of the world's largest EV markets, with over 6 million EVs across over 300 EV models, its advancements in battery technology have aided in lowering the cost and EVs becoming competitive."
China is now the market leader in next-generation electric vehicles. Large R&D investments, favourable government policies, FDI inflows, and aggressive acquisition of raw material resources across geographies were key enablers of China's spectacular growth in Li-ion batteries.
According to industry estimates, India will need between 969–1,452 kilo tonnes of anode, cathode, and electrolyte material (the components for a battery) between 2023 and 2030, underscoring the importance of prioritising other energy storage technologies as well.
Furthermore, as cell manufacturing is very power-consuming, requiring 250 GWh of power annually for a 5 GWh plant, the availability of a cheap and reliable power supply will be critical.
Importance of low cost power for domestic cell manufacturing
For its cell manufacturing and other clean energy businesses including hydrogen, Reliance Industries recognised the importance of having a low-cost solar interface from the start.
The conglomerate is setting up a solar photovoltaic giga factory in Jamnagar with a total capacity of 20 GWh, which will be commissioned in four phases of 5 GW each and targets to touch 100 GWh of solar energy by 2030.
The uninterrupted solar power at the Dhirubhai Green Energy Giga Complex in Jamnagar, Gujarat, will be used to power RIL's ambitious end-to-end battery ecosystem. RIL has been awarded a 5 GWh cell manufacturing contract under the Government of India's Advanced Cell Chemistry (ACC) production-linked incentives (PLI) manufacturing plans.
If India is to gain a competitive advantage in cell manufacturing, CEEW believes that controlling the ecosystem where domestic production of active cathode material is most critical.
"Because the market prices for the minerals used in battery cathodes are highly volatile. "As commodity prices change, so will the actual cost of batteries based on their chemistry," according to the CEEW report on lithium ion battery manufacturing.
Furthermore, CEEW claims to establish a 50 GWh lithium-ion cell and battery manufacturing plant under the Production Linked Incentive (PLI) scheme, India will need to invest nearly USD 4.5 billion.
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