EVs to Galvanize Sustainable Indian Battery Market

Summarize with:

Rajneesh De, Consulting Editor, APAC News Network

India has been a steadily growing market for EVs in the last few years with currently over 2.3 million users. In FY23, India’s EV sales grew by a whopping 174% to cross 1.2 million. Electric two-wheelers constituted more than 60% of these units sold while passenger electric three-wheelers accounted another 29%. More than half the overall three-wheelers now registered in India are today electric.

What this rise has meant is an ever growing need for EV batteries and a significant demand to increase battery production in the country. The cost of EV batteries has been declining steadily owing to advancements in battery technology, economies of scale, and increased manufacturing efficiency. This reduction in battery costs is gradually making EVs more affordable at least for the two-wheeler and three-wheeler segments and fueling growth.

Dissecting the EV Battery Market

The Indian EV battery market was pegged at Rs 1398 crore in 2023 and is expected to grow at a CAGR of 10.56% to reach Rs 2310 crore in 2028. Contrast this with the overall Indian EV market valued at $3.21 billion in 2022 and is expected to grow to $113.99 billion by 2029 at a CAGR of 66.52%. The EV battery market though is still heavily dependent on importing 60–65% of the total component requirement for battery packs.

With the government setting a target to achieve 30% electrification of India’s vehicle fleet by 2030, the EV battery market dynamics are expected to witness major changes too. While in 2022, 25% of EVs sold in India were purchased by fleet operators, including taxis, the gradual expected shift towards passenger vehicles could play a significant part in this changing dynamics.

The key players in the EV battery market include Amara Raja Batteries, Exicom Tele-Systemsm Exide Industries, Okaya Power, Panasonic India, Samsung SDI, TataAutoComp GY Batteries and Toshiba India among others. Amara Raja has invested about Rs 20 crore in its lithium-ion development hub in Tirupati in Andhra Pradesh. Exide plans to invest about Rs 600 crore to establish a lithium-ion cell manufacturing plant in collaboration with China’s SVOLT Energy Technology in Bengaluru.

Understanding Battery Types

There are different types of EV batteries in the market though it is dominated by lithium-ion batteries over nickel metal hydride batteries ad lead-acid batteries. Lithium-ion batteries are most preferred by EVs due to their high energy density, longer lifespan, and lighter weight compared to other battery chemistries. These batteries are also known for their fast-charging capabilities and therefore valued at Rs 106.78 crore dominate the market share for EV batteries.

Nickel-metal hydride (NiMH) batteries were widely used in earlier generations of hybrid EVs and some early electric vehicle models. But in India, their adoption in EVs has always been limited. NiMH batteries offer moderate energy density and are relatively cheaper compared to lithium-ion batteries but EV manufacturers are still shifting towards lithium-ion technology due to its higher energy density and better overall performance.

Lead-acid batteries have been prefered in conventional internal combustion engine vehicles. And in few low-speed EVs or electric rickshaws due to their lower cost compared to other battery technologies. Lead-acid batteries have limitations in terms of energy density, weight, and cycle life, and that reduces their suitability for EVs that require higher performance and longer driving ranges. The dominance of lead-acid batteries in the Indian market is expected to further diminish in the next few years.

Looking at EV battery adoption by propulsion type, the hybrid EVs account for the largest market share amongst batteries. These dominate over the battery EVs and plug-in hybrid EVs in terms of battery adoption. Battery EVs rely solely on electric power stored in the vehicle’s battery for propulsion. These are gaining significant traction in the market due to their environmental benefits and advancements in battery technology as well as government incentives. They offer long driving ranges, fast charging capabilities, and are suitable for various vehicle segments, ranging from compact cars to SUVs.

Plug-in hybrid EVs combine an internal combustion engine with an electric motor and a battery. These offer the advantage of extended range and flexibility, as they can operate in electric mode or switch to hybrid mode when needed. In the Indian market, these EVs provide a transitional solution for consumers who seek the benefits of electric driving while having the convenience of a backup internal combustion engine.

Hybrid EVs feature both an internal combustion engine and an electric motor. These offer improved fuel efficiency, reduced emissions, and are well-suited for city driving conditions and therefore gaining popularity in sedans and hatchbacks, where fuel efficiency is a significant consideration for consumers. However, the dynamics might shift as the focus of the Indian government and the industry is towards promoting fully EVs as a sustainable mobility solution.

EV Battery Growth Drivers

Government Initiatives – FAME and PLI

The government is promoting EV adoption through the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. Launched in 2015 and subsequently extended, FAME offers financial incentives and subsidies making EVs more affordable and attractive. Additionally, the tax benefits, lower GST rates, and exemption from road tax for EVs have been other catalysts. The government has set a target to achieve 30% EV penetration by 2030, further emphasizing its commitment to the growth of the EV battery market in India.

Apart from FAME, policy initiatives like the Production-Linked Incentives (PLI) scheme are designed to support domestic industry development. FAME II encourages EV equipment manufacturers to source at least 50% of their components locally, while the PLI scheme targets Advanced Chemistry Cell (ACC) manufacturers.

Rising Environmental Concerns

India faces severe air pollution challenges, particularly in the major cities which rank amongst the highest polluted cities in the world. EVs powered by clean energy sources are seen as a viable solution to address environmental pollution concerns. The government’s focus on reducing pollution and improving air quality has led to policies and regulations that promote electric mobility, in turn driving the demand for EV batteries in India.

India has also published Battery Waste Management Rules from 2022. These rules mandate that 90 % of the materials discarded must be recycled and recovered by 2026, with 20% of that going into new batteries by 2030.

Focus on Mining Exploration

India is also focusing on expanding mining exploration both within the country and overseas by joining the Minerals Security Partnership (MSP), a global alliance led by the US, to catalyze investment in critical mineral supply and value chains. These strategies aim to increase domestic battery availability, reduce imports and lower battery costs. At the same time, these are targeted to ensure access to key raw materials like lithium, nickel, cobalt, and manganese, which constitute a significant portion of cell costs.

Recycling Opportunity

The International Council on Clean Transportation (ICCT), estimates that approximately 50% of spent battery materials can potentially be mined. This presents an opportunity to significantly reduce the annual demand for these minerals by up to 28% over the next two decades. NITI Aayog forecasts that by 2030, there could be as much as 128 gigawatt-hours of recyclable batteries available, with EV batteries constituting 46% of that. India’s current recycling capacity stands at a modest two gigawatt-hours approximately. It would have to increase about 60 times in the next eight years to achieve these numbers.

Battery Swapping

In 2022, NITI Aayog proposed a new ecosystem with the battery as a service (BaaS) model. Under battery swapping, EV users can replace the discharged batteries with charged ones at the swap stations. A swapping at any particular location comprises multiple batteries getting charged constantly. An EV user can locate a swapping station, replace the depleting battery with a charged one, and put the empty battery on charge. Inn a market that is price-sensitive, market forces and economic factors will play a significant role in the development of battery swapping.