Buoyed by the acceleration in EV adoption in India, EV makers are concentrating their efforts on making them more cost-efficient to encourage potential buyers to consider clean mobility and sustain the uptick.
Buoyed by the acceleration in EV adoption in India, EV makers are concentrating their efforts on making them more cost-efficient to encourage potential buyers to consider clean mobility and sustain the uptick.
So far, dependence on foreign imports for lithium-ion batteries has acted as a roadblock for manufacturers to deliver cost-efficient EVs to Indian customers. The battery cells, which account for 50-60% of an EV's cost, need to be predominantly imported from China or Taiwan and then assembled in India. The numbers indicate that India imports 70% of its Li-ion cell requirements from China and Hong Kong, leading to higher EV costs.
However, in recent times, developments such as falling lithium prices and the discovery of lithium reserves in India have provided a glimmer of hope for EV makers to import lithium at a lower cost and potentially source it locally in the future. This paves the way for the manufacturing of affordable electric vehicles in India.
Speaking of lithium, the crucial element used in EV battery production, its prices have recently witnessed a decline, resulting in a positive impact on battery costs. This price reduction can be attributed to various factors, including slower sales growth in Europe and China after the expiration of electric car subsidies. Consequently, lithium prices have dropped by over 30% this year, marking the end of a two-year period during which the value of lithium multiplied twelvefold, as per reports. Also, a remarkable development in India’s pursuit of making affordable batteries and achieving self-reliance in cell manufacturing is the recent discoveries of lithium reserves in the country.
The identification of the country's first-ever lithium reserve in Jammu and Kashmir, along with another substantial reserve in Degana, Rajasthan, presents a huge opportunity for domestic lithium production. Geological Survey of India (GSI) and mining officials have confirmed that the lithium deposits in these reserves are substantial enough to meet approximately 80% of India's total demand. This discovery holds tremendous potential for reducing India's reliance on China as a major lithium supplier, lowering imports and ultimately making EVs affordable.
The identification of these abundant lithium reserves perfectly aligns with India's objective of establishing a robust domestic lithium supply chain and reducing dependence on imported lithium. By harnessing these reserves, India can significantly lower production costs and enhance the affordability of EVs in the domestic market. This breakthrough not only helps mitigate supply chain risks associated with imported lithium but also sets the stage for sustainable and self-sufficient growth in the EV industry.
In addition to the decline in lithium prices, another significant factor contributing to the affordability of EVs is the Indian government's strong commitment to achieving self-reliance in battery manufacturing. The introduction of initiatives such as the Faster Adoption and Manufacturing of Electric Vehicles (FAME) program and the Production-linked Incentive (PLI) scheme has encouraged local players to scale up cell manufacturing within the country. This has acted as a catalyst in reducing import dependency, lowering EV costs, and fostering self-sufficiency. Moreover, the government's decision to waive customs duty on capital goods required for battery pack manufacturing is going to enable EV manufacturers to offer vehicles at significantly lower prices, expanding access to a wider range of consumers.
In recent times, India has made significant progress in manufacturing lithium-ion batteries for electric vehicles. According to statistics, the country currently produces 81% of these batteries for electric vehicles, and as EV adoption continues to increase, the lithium-ion battery market is expected to receive a significant boost. Report suggest that India's lithium-ion battery market is projected to reach USD 5.03 billion in the next five years, with a compound annual growth rate (CAGR) of over 15.21% during the forecast period.
At this juncture, to make EVs more affordable, the focus must also be on improving access to finance for EV makers, strengthening the manufacturing infrastructure, reducing material costs through incentives and government support, and building a robust supply chain. These measures will expedite progress towards self-reliance, promote domestic manufacturing, and ultimately lower the overall cost of electric vehicles, making them more accessible to consumers.
India has also made remarkable strides in expanding electrification to remote and underserved areas. Overcoming supply chain challenges and leveraging advanced solar and wind power technologies, the country has improved its infrastructure and tapped into abundant renewable energy sources. As the costs of renewable energy components continue to decrease, the electrical grid becomes more sustainable, reducing reliance on fossil fuels.
With improved infrastructure and an ample supply of renewable energy, India is well-positioned to facilitate widespread adoption of EVs. Indian EV makers are actively working to revolutionize the affordability of EVs, driven by falling lithium prices and the government's support for domestic battery manufacturing. The concerted efforts to achieve self-reliance in battery production, coupled with the discovery of abundant lithium reserves within the country, are poised to reshape the EV market in India. By harnessing these resources, India can significantly lower production costs, reduce import dependency, and enhance the affordability of EVs for a wider range of consumers.
Source - The Economic Times