By Samrath Kochar
A robust infrastructure is the backbone of a strong electric vehicle ecosystem. Keeping pace with the bulging Indian electric vehicle space, the EV battery industry too is growing here, which is highly crucial to realise the country’s mobility transition goal.
The battery is to electric Vehicles, what wind is to a sailboat. The Indian battery industry is at the cusp of a revolution as the demand for batteries is boosting exponentially with the growing popularity of EVs. While India is one of the largest automobile markets worldwide, its transport sector is the largest consumer of petroleum. Road transport is the biggest polluter accounting for 90% of CO2 emissions.
The rise in the number of on-road vehicles is due to the explosive growth in personal vehicle numbers and a continuing shift of freight from railways to road transport. While the country must continue growing the capacity of the transport sector which facilitates the movement of goods and people across the country, it is necessary to curb the pollution caused by them.
Indian battery market would grow at a CAGR of 15 per cent during 2022-2027.
The government’s ambitious sustainable mobility targets can play a critical role in reducing its dependence on fossil fuels and lead to an era of green and clean mobility. Moreover, achieving the Hon’ble Prime Minister’s laudable commitment of net-zero emissions target by 2070 at the COP26 last year would not be possible without transforming the mobility and transport sector, which is amongst the biggest carbon emitters in the country. While India has the vision to electrify its public transport completely and 40 per cent of personal mobility by 2030, achieving this would not be possible without a significant push to battery manufacturers in the next three to four years.
Factors boosting the battery market in India
According to a leading market survey, the Indian battery market would grow at a CAGR of 15 per cent during 2022-2027. The government had launched Faster Adoption and Manufacturing of Hybrid and Electric Vehicles-I (FAME-I) in April 2015 and extended it for two years in 2017. After its culmination, FAME-II was launched with an approved outlay of Rs 10,000 Cr for two years (2019-2021). The plan greatly encouraged manufacturers and provided several incentives to consumers, and as a result, over 8.7 lakh electric vehicles were plying on the Indian roads.
While the outbreak of COVID-19 and its 2nd wave had a significant impact on the growth of the battery market, it has been regaining the lost ground over the last few months. With the extension of the government’s ambitious scheme FAME-II for another two years till 2024, EV manufacturing, which drives the demand for batteries, has been regaining momentum. Electric mobility relies heavily on the availability of lithium-ion batteries, and hence there was a need to promote the manufacturing of electric batteries to support the rapid transition.
As a part of its effort to boost the economy during the ravaging times of the first year of COVID-19, the government approved the Production Linked Incentive (PLI) scheme in November 2020. The policy was formulated to support 10 key sectors that could enhance the country’s manufacturing and export capabilities under the Atmanirbhar Bharat Mission. With a total outlay of Rs 1,45,980 Cr, the scheme was designed to support the industries for the next five years.
Understanding the significance of the battery manufacturing, the largest share of this outlay- Rs 75,000 Cr, was allocated for Advance Chemistry Cell (ACC) Batteries and Automobiles & Auto Components. In addition to this massive corpus, an additional outlay of Rs 18,100 Cr was allocated to the segment under the National Program on Advance Chemistry Cells (ACC) battery storage. ACC import bills have been stinging the economy. The government wanted to reduce this by achieving the manufacturing capacity of 50 Giga Watt Hour (GWH) of ACC.
The impact of government schemes
Amid the uncertainties of the pandemic, Government initiatives have revived hope for the sector and given it a remarkable boost. Around 115 companies from the automobile and auto component segment have applied for the Production Linked Incentives scheme. Whereas 49 original equipment manufacturers of different electric vehicles have registered for the benefits under FAME-II. Under the Advanced Chemistry Cell (ACC) Battery Storage Programme 10 battery manufacturers have presented their bids.
The camaraderie formed between the government and the industry would have a long-term impact on the industry’s growth. The government’s move to authorise battery-operated vehicles with green licence plates and the exemption of permit requirements has further increased the adoption of EVs. People from the lower strata of society have found a new employment opportunity through e-rickshaws, and many rickshaw-pullers who were doing excruciating labour have opted for these vehicles. Making EVs more attractive for buyers across segments, the central government has advised state governments to waive-off road tax.
How does Budget 2022 impact the industry?
Budget 2022 aims to form the springboard for India to become a self-reliant, sustainable and progressive country before its 100th Independence anniversary in 1947. The government’s strong commitment to addressing environmental concerns with corrective measures and paving ways for faster EV adoption would have a lasting impact on the EV and allied sectors.
The government has taken some affirmative steps that would help it achieve the mobility transformation sooner than later. The decision to bring a policy governing battery swapping is praiseworthy. In a shift from the traditional public charging infrastructure, the step would lead to the establishment of battery charging stations. These charging stations would create new service models by providing people with energy solutions through- Battery as a Service (BaaS) and Energy as a Service (EaaS) model.
The government has also indicated that it would be formulating interoperability standards, which would help battery manufacturers create standard batteries useful across the segment, irrespective of the vehicle type. With these standards in place, the battery industry would not need to manufacture multiple battery models and it would be able to focus on improving the quality and quantity of single product types.
The way ahead
While the budget was pro-EV and batteries sector, the industry expects the government to mitigate some other challenges of the segment. Addressing these issues in the times to come would strengthen its road to progress, and it would be able to realise and move beyond the growth projections.
- Extend FAME II timelines: While FAME-II timelines have been already increased to 2024, extending the timelines for two more years up to 2026 would be beneficial for the sector.
- Revise GST input on raw materials: The present inverted duty structure is an issue for the battery and EV manufacturers. While OEMs and component manufacturers buy raw materials at 18 to 28% GST, they have to sell the final product at 5% GST. Reducing the tax on raw materials will make the business more profitable and make the products more affordable.
- Relax PLI schemesto make them viable for small and mid-scale organisations: The rigid selection criteria of PLI schemes has left out many small and mid-sized companies engaged in manufacturing EV batteries and auto parts. The smaller players can play a crucial role in parting the demand-supply gap. Therefore, modifying the current guidelines or introducing a new recourse to make the scheme viable for these organisations will boost the EV ecosystem, increase competition in the market, promote sectoral growth, and significantly reduce the cost of the final product.
- Ensure availability of rare minerals and raw materials: Some countries engaged in the production of batteries have strong control over the sources of minerals like manganese, cobalt, nickel, lithium etc. that are concentrated in a few countries. The government needs to make budgetary provisions and chart out a roadmap to ensure the availability of these resources, which will be crucial in making India Aatmanirbhar in battery manufacturing.
Without a robust battery manufacturing ecosystem in the country, India cannot realise its sustainable mobility targets. The next few years would be crucial in developing the production capabilities of the battery manufacturers in the country. While the government needs to understand the requirement of the segment and take affirmative steps, the industry needs to enhance its capabilities to extract optimum benefits of the government schemes and help in making India a battery manufacturing hub.
Also Read: Can Indian car Industry break the Jinx in 2022?
(Samrath Kochar is the founder and CEO of Trontek.)
(Disclaimer: The views expressed in the article above are those of the author’s and do not necessarily represent or reflect the views of Autofintechs.com. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.)
