Make In India: Accelerating EV Growth From Within
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Today, China is the global leader in the battery power ecosystem through its dominance in the lithium-ion raw material supply chain, lithium-ion battery production and number of electric vehicles on its roads. This is a result of years of industrial planning and methodical preparation for dominance in this sector critical to domestic transport, energy policy and national security. But we must keep our current stage of the electric transition in perspective and realize that India now has a unique opportunity to still be a global leader in electrification.
EV penetration across the globe remains less than 2 per cent as a percentage of total stock. We are at the outset only, the very start, of this change. Historically, major industrial shifts have developed outside India, but today India has a chance to seize the moment and assume a leadership role in these nascent, multi-trillion-dollar markets across transportation and energy. We must aggressively act now to develop India’s position in this battery ecosystem to capitalize on the economic opportunity and cement our own self-reliance in key strategic industries. It may be convenient to rely upon China to provide lithium-ion battery cells and battery packs to support our electric and climate goals in the near-term, but we do so at our own peril. It is our future. Just as China has, we must assume responsibility for ourselves.
Across the globe, governments and industry are increasingly focused on developing domestic manufacturing capacity across the lithium-ion battery value chain to reduce foreign reliance, particularly from China, and to maintain global competitiveness. It is vitally important to accelerate EV penetration in India to achieve our climate goals and enjoy the clean air we have experienced since lockdown. Acceleration through importation, however, is not a long-term strategy that will maximize India’s competitiveness and domestic job creation. We must build in India and lead from home.
Major components of the lithium-ion battery value chain include: raw material mining and refining, cell manufacturing, pack manufacturing and EV manufacturing. India should endeavor to develop manufacturing capabilities in as many of these areas as possible through strategic policy and technology solutions. This value chain includes many different sub-industries – materials, chemistry, mechanical and electrical engineering, infrastructure, automation, etc – that have the potential to not only create near-term jobs but, more importantly, develop a long-term, diverse manufacturing base anchored in two of the largest global industries – mobility and energy.
If we truly desire to create a step-change in our manufacturing trajectory, then we must focus on developing knowledge centers in future industries. India has the 4th largest car market and the largest 2-wheeler and 3-wheeler markets. Why would we surrender this unique opportunity? We have the chance to create hundreds of thousands of jobs at a minimum throughout the battery value chain and EV ecosystem. But if we do it right, we also can access a large export market that will lead to even greater employment expansion. This is what China has achieved to date.
Today India is heavily reliant on Chinese companies for lithium-ion battery cells and battery packs. Some Chinese firms are already establishing outposts in India. Other companies from around Asia have made announcements and maintain a small presence, too. There are a few companies that design and build their own battery packs, but these are the exception. The Make In India policy can help jumpstart the domestic battery manufacturing ecosystem, and China’s industrial policy offers an example to follow. Domestic companies enjoyed an immense advantage. In the cases where a domestic capability did not exist, partnerships were required that also favored domestic learning and capacity growth. There are difficult engineering problems to solve for battery packs operating in India. We know these challenges and can design around them. The environmental challenges such as heat, vibrations and dust for long-term performance will not be solved by generic battery packs.
India’s opportunity has many similarities to China that must be leveraged the same way – very large domestic mobility market that large international companies wish to access; benefits of faster adoption in 2-wheeler and 3-wheeler to move quickly; and a large technical, low cost labor force. We must be as thoughtful, disciplined and bold as China has been in supporting domestic industry priorities. Where we won’t have a domestic capability for some time, such as in battery cell manufacturing, it makes sense to build that infrastructure out initially through a foreign partner which requires manageable import duties of imported battery cells. Conversely, incentives to domestic battery pack manufacturers would accelerate domestic growth but it should be focused on ground-up manufacturing. India has become the 2nd largest cell phone manufacturer and in great part due to the Phased Manufacturing Program. Though certainly positive for the manufacturing sector, India’s manufacturing is only capturing a small portion of the value because most cell phone components are imported through a semi-knockdown kit structure.
Though battery prices continue to decrease and the EV total cost of ownership is already at parity or below ICE alternatives, the upfront cost is still an obstacle. The government through FAME II is helping. COVID-19 also has increased awareness around anti-pollution and the benefits of electrifying mobility. But we must create more domestic technology and continue to lower the cost through other areas such as 2nd life applications and recycling. 2nd life has the potential to lower the battery cost further. With almost 100 per cent import dependency for critical batteries materials such as Lithium, Cobalt and Nickel, recycling is the most viable option to develop raw material capacity.
Whether in China or elsewhere, many emerging leaders in the battery value chain are new companies, not incumbents. Most of the existing global cell phone manufacturers did not exist before the shift to smartphones and the Chinese EV leaders were not incumbents. Instead of looking to foreign companies to build the next generation of mobility and energy storage products for our country and the world, let’s do it ourselves this time. The opportunity is India's to seize and lead.