India's Entry Into the EV Battery Market Lacks Some Key Ingredients

As the world tries to wean itself off dependence on China for crucial battery materials, India is taking bold steps to position itself as an alternative in the electric vehicle supply chain. The government has unveiled incentives of at least $3.4 billion to expedite its lagging adoption of EVs as Prime Minister Narendra Modi vows to reach net zero by 2070. The idea is that manufacturing the costliest component - batteries - locally will make the end product more affordable for the mass market and set the country up as a potential exporter, tapping into surging global demand. The initiatives have piqued the interest of billionaires like Mukesh Ambani, whose Reliance Industries Ltd. is building an EV battery facility as part of a broader $76 billion push into clean energy.

Ambani's is among three companies, including scooter-maker Ola Electric Mobility Pvt. and bullion refiner Rajesh Exports Ltd. set to receive incentives under a $2.3 billion program to support advanced battery cell development.With gigawatt-scale manufacturing facilities planned, India could carve out a role as an exporter of lithium-ion cells to European and American markets, said Rahul Prithiani, senior director for energy, sustainability and commodities at Crisil Ltd., the local analytics unit of S&P Global.
‍
"But for this, India needs to secure robust supply chains along with recycling capabilities," he said.And therein lies the biggest challenge to India's EV ambitions. The world's second most populous country has only a fraction of the raw materials needed to satisfy domestic demand for lithium-ion batteries - forecast by Crisil to grow 100 fold by 2030 - let alone produce on a global scale.
‍
As the world moves away from gasoline-fueled combustion engines, demand for lithium, nickel, cobalt and other metals that go into lithium-ion batteries is soaring. BloombergNEF estimates that global appetite for the metals used in next-generation batteries increased 50% last year alone and will nearly quadruple by the end of the decade. Supplies are getting tight, and that's already driving up costs."
‍
The entry barriers are quite high," said Jasmeet Singh Kalsi, director of Manikaran Power Ltd., which is setting up India's first lithium refinery and scouting for nickel, cobalt and copper assets overseas. "China has captured most of it."Manikaran could buy spodumene, a source of lithium, for
China's dominance in the lithium market extends throughout the entire supply chain; its companies have already secured agreements with major lithium-producing nations and have a head start in processing raw materials into battery-grade inputs and manufacturing storage packs.
India has a long way to go to catch up, and faces competition from other countries, including the US, which is pushing to grow domestic battery production in an effort to break China's hold on the market. Indian companies are in trade talks to procure more lithium from countries like Australia, which is the source of roughly half the world's lithium exports.
‍
State-backed Coal India Ltd., the country's largest miner, has said it also plans to extract more of the metals and minerals used in batteries, though few details have been released. India announced a small lithium discovery near Karnataka in 2021 and is planning to open up mining of key minerals to private companies, but will have to primarily look overseas for supplies. Copper, another metal used in EVs, is also in focus. Hindalco Industries Ltd., India's biggest producer of copper, estimates that demand is likely to more than double in the next 10 years - a particularly sensitive dynamic given the country's increasing reliance on importing the metal.
‍
India became a net importer of copper in 2018 after the closure of Vedanta Ltd.'s 400,000-ton-per-year plant, which cut the country's output by about 40%. To reverse that trend, billionaire Gautam Adani – Asia's richest man and one of Ambani's chief rivals – is building a 500,000-ton-per-year copper refinery in western India. His Adani Enterprises aims to start production by the first half of 2024.
‍
India is not the only country facing a shortage of metals. According to Crisil, India will need 35,000 tons of nickel sulphate, 11,000 tons of manganese sulphate, and 11,000 tons of cobalt sulphate to meet a projected domestic demand of 200 gigawatt hours of lithium-ion batteries by 2030. Global demand for the purest form of nickel is expected to increase to 1.34 million tons by 2030, according to forecasts from BloombergNEF.
‍
According to Komal Kareer, an analyst at BloombergNEF, while India has large manganese and graphite resources, production has yet to achieve scale. This means that the country remains import-dependent, and this is unlikely to change in the next decade. This in turn will make lithium-ion batteries more expensive, which will hamper India's plans to develop more affordable EV models for both the domestic and export markets.
‍
India's copper imports have increased significantly over the past decade. This is likely due to the country's growing economy and population.
Although it may not seem like it with Tesla Inc. making headlines every day, analysts stress that the transition to green energy is still in its early stages. China may have a head start, but that doesn't mean it will stay ahead. Countries all over the world are already developing alternatives to lithium-ion batteries. With raw material prices rising, there is increasing interest in the potential of sodium-ion batteries. The materials needed for sodium-ion cells are abundant and relatively inexpensive, although the technology has not yet reached the same level of energy storage as lithium-ion batteries.
‍
Reliance is working to replace lithium with sodium, whose production costs are similar to traditional lead-acid batteries. In late 2021, Ambani’s company spent £100 million ($122 million) to acquire Faradion Ltd., a UK-based sodium-ion battery technology firm that claims to already be delivering 160-170 watt-hours per kilogram commercially. That puts it not far off the energy density offered by some lithium-based cells.
‍
In 2021, CATL, a key Chinese developer of sodium-ion cells, said that its first-generation products would deliver 160 watt-hours per kilogram. If the technology takes off, India could be well-placed to compete.
"The materials that are driving industrialization right now may not be the same in 10 years time," said Chandra Bhushan, president of the International Forum for Environment, Sustainability & Technology. "I'm not that pessimistic that the world will only be dependent on a few materials to drive industrialization."