Li-ion Battery Manufacturing and India a Favoured Destination?

Electric vehicle batteries have been called the “heart” of EVs. Much like the vital organ of the human body, it distributes electrical power to the various systems of an electric car. An EV battery has four major components: the positive electrode called the cathode, the negative electrode called the anode, a micro-permeable separator that keeps these two electrodes apart, and an electrolyte (a lithium salt). The cathode is made out of lithium, manganese, nickel, and cobalt. The anode is commonly made out of graphite but, like the cathode, it also contains lithium.

Importantly, there’s no reason why the world needs to remain dependent on China, which, has a 65% share of refined lithium, nickel and cobalt — key ingredients in EVs — but has almost no presence in output or reserves of their raw materials. Over time, other nations can pop up to process and supply such minerals.

Lithium-ion batteries make up the most expensive component of electric vehicle accounting for 40—50% of its cost. With the increasing penetration of EVs in the global transport system, the demand of Li-ion batteries for EVs is going to skyrocket. Apart from this, the demand for Energy Storage systems (ESS) such as renewable energy integration with the grid will boost the Li-Ion battery demand. A 2023 report by McKinsey & Co highlighted that the global battery demand is projected to jump from 700 GWh in 2022 to a massive 4.7 TWh in 2030, driven by the advancements in the mobility sector. (see the chart).

With a rise in demand for electric vehicles across commercial and personal vehicle segments, the demand for lithium-ion batteries will witness a sharp surge. Currently, lithium-ion batteries are one of the most sought-after technologies for their energy density and use case. In the upcoming years, more innovations can be expected in the battery type’s energy density, charging speed, and overall safety features that help improve their performance.

Tesla Inc., the company best known for electric vehicles, said its energy-storage division — the unit that makes utility and home batteries — will likely be its growth engine for rate of deployments and revenue in 2024.

While energy-storage deployments dipped in the fourth quarter compared with the previous one, total installations for 2023 were more than double than in 2022, according to its investor filing. The unit’s profits nearly quadrupled. Tesla said it installed 14.7 gigawatt-hours of battery storage in 2023. Its energy storage unit booked $1.4 billion in revenue for the fourth quarter and $1.1 billion in costs for those sales.

Innovations in EV Battery:

As the world becomes aware of the merit of sustainable mobility, innovations in EV battery technology continue to increase at a commendable rate. Advancements in battery technology, such as solid-state batteries, lithium-ion and lithium-sulphur batteries, and silicon anode batteries, are taking centre-stage in the industry. Battery manufacturers and EV makers are focusing on increasing battery energy density and fast charging features. They are also keenly navigating technological developments to boost battery longevity and facilitate recycling so that the masses can overcome the challenges in EV adoption.

However, the domain is dependent on technological innovation to stay relevant in the evolving market and help achieve the national EV goals. This dependency calls for a more active approach toward R&D efforts backed by timely capital allocation to catalyse the growth of advanced batteries and EV adoption.

Legacy automakers with electric teams say the race to maximize or regenerate power – Formula E cars start each race with only 60% of the battery capacity they need and have to generate the rest through braking – helps them develop more efficient motors and invertors, and software to enhance performance and range.

India’s commitment to reducing Carbon emissions:

Indian Prime Minister Modi is attempting to persuade voters at upcoming elections that his government can provide cheap and reliable electricity, while simultaneously pursuing policies aimed at accelerating efforts to curb greenhouse gas emissions.

India will earmark a major share of the $134 billion in planned infrastructure spending in next year’s budget to the energy sector to meet surging demand.

India has committed to increase its share of non-fossil fuel-based generation sources to 40% by 2030 which necessitates a demand for flexibility in power systems. PM Modi, who is seeking a third term, has set an ambitious range of climate goals over the past decade. These include lifting the share of clean-power capacity in its electricity mix to 50% by the end of the decade, from around 40% now, and guiding the economy toward net zero by 2070.

Energy storage will play a crucial role in increasing the system’s overall flexibility by serving multiple grid applications. The Energy Storage Association predicted in 2022 that the requirement for battery storage in India would reach 160 GWh in 5 years.

EV Market and India’s Potential in Battery Manufacturing:

Toyota Motor Corp. Chairman Akio Toyoda believes battery electric vehicles will reach at most 30% market share, with the rest taken up by hybrids, hydrogen fuel cell and fuel-burning cars. EVs will account for 75% of new car sales and 44% of passenger vehicles on the road by 2040, according to a forecast by Bloomberg NEF.

As per reports, the Indian EV market was valued at $3.21 billion in 2022 and is expected to grow to $113.99 billion by 2029 at a compound annual growth rate of 66.52 per cent.

Since EV batteries make up nearly 50%-70% of an electric vehicle’s cost, reducing its cost of production and price could make EVs more affordable for the general masses.

Moreover, the huge potential for India in manufacturing EV battery packs as the country is heavily dependent on importing 60–65 percent of the total component requirement for battery packs. India’s Lithium Battery Imports surged from $93 million in 2014 to $2 Billion in 2022, mainly from China and Hongkong to cater to the current demand.

However, Indian battery manufacturing is on an upswing as more Giga factories are expected to scale to 100 – 150 GWh annual capacity by 2030. By 2035 the same target is expected to reach 500 GWh. Indian Government through Production Linked Incentive (PLI) Advanced Chemistry Cell scheme is targeting for 50 GWh cell manufacturing capacity for self-reliance.

The battery packs production will not be limited to Indian EV manufacturers however globally given U.S. firms are increasingly viewing China as a risky bet for their supply chains. India is set to benefit as companies look elsewhere to set shop. As many as 61% of the 500 executive-level U.S. managers surveyed by a market research firm said they would pick India over China if both countries could manufacture the same materials, while 56% preferred India to serve their supply chain needs within the next five years over China.

A momentous shift is underway in global markets as investors pull billions of dollars from China’s sputtering economy, two decades after betting on the country as the world’s biggest growth story. Much of that cash is now heading for India, with Wall Street giants like Goldman Sachs Group Inc. and Morgan Stanley endorsing the South Asian nation as the prime investment destination for the next decade.