Rising EV Penetration to Drive over $9 Bn Investment in Battery Cell Manufacturing in India: Report

With the rising electric vehicle (EV) penetration in the country, investments in battery cell manufacturing are expected to exceed USD 9 billion, as estimated by ICRA Limited – a leading credit rating agency in India.
 
Spurred by Government support in the form of subsidies, enhanced awareness, and increasing product launches, the EV segment saw a significant upturn in prospects in FY2022. EV penetration across automotive segments is expected to grow exponentially over the next decade; with battery remaining the most critical and costly component of an EV, said the rating agency.  
 
In addition to the robust demand for EVs, the annual battery demand for stationary applications (grid storage, telecom towers, etc.) is also likely to grow at a rapid pace and be substantial. Given the incremental demand from various applications and future growth prospects (post 2030), ICRA estimates investments in cell manufacturing to exceed USD 9 billion, it further added.
 
Explaining further the prospects of the EV sector, Shamsher Dewan, Senior Vice President & Group Head - Corporate Ratings, ICRA, said, “In EVs, advance chemistry batteries 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 of developing battery cells locally. Multiple challenges exist on the road to establishment of a cell manufacturing ecosystem, 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.”
 
Achieving economies of scale in battery manufacturing will remain critical in lowering the cost of an EV and helping achieve pricing parity. Additionally, given that the charging infrastructure penetration will only improve gradually, improvements in energy efficiency remain imperative, the rating agency added.
 
Locating cell manufacturers close to the original equipment manufacturers (OEM) would allow for the creation of a research and innovation ecosystem, which would aid the development of batteries with improved energy efficiency and which are better suited to the Indian climatic conditions, it further suggested.
 
Given the need to invest in cell manufacturing units to keep pace with the expected surge in battery demand for both EV and stationary applications, numerous entities have already committed significant investments in this segment.