Government’s target of pushing electric vehicles (EV) to account for 30 per cent of the annual automobile sales in the country by FY30 seems difficult due to slower adoption in electric four-wheelers, limited progress in charging infrastructure among others.

“CareEdge Ratings has considered a 20 per cent EV penetration by FY30, considering the slower-than-anticipated EV adoption in the 4-wheeler segment, amidst consumer preference for hybrid 4W vehicles and the slow progress in EV charging infrastructure,” the ratings agency said in a report. 

In case of battery energy storage systems (BESS), it expects cumulative grid level energy storage capacity to reach around 100 gigawatt hour (GWh) by March 2030.

Hardik Shah, Director at CareEdge Ratings, said lithium-ion (Li-ion) chemistries rely heavily on scarce minerals such as lithium, cobalt, nickel etc, wherein India has limited natural reserves. 

Therefore, domestic players need to secure long term supply sources from countries having sizeable reserves along with focus on battery reuse and recycling, which shall provide environmental benefits and reduces price and supply risk associated with imports of these minerals, he added. 

“Furthermore, the relative cost-competitiveness of Indian manufacturers, in the context of capacity addition and pricing policy of large global integrated players, especially Chinese manufacturers, will be a key factor to monitor,” Shah emphasised.

Declining costs

Cost of lithium-ion batteries has declined over the decade ended calendar year (CY) 2023 on the back of technology advancement along with greater economies of scale which has supported its faster adoption by its end-use sectors resulting in significant growth in its demand.

The cost has significantly declined from $780 per kilo-watt hour (kWh) in CY 2013 to $139 in CY 2023, on the back of technological advancement and economies of scale, making Li-ion batteries the most dominant battery technology today.

Demand for Li-ion batteries

CareEdge report points out that the domestic lithium-ion battery storage demand of around 15 gigawatt hour (GWh) currently is being almost entirely met through imports of lithium-ion cells/ batteries. 

“CareEdge Ratings expects Li-ion battery demand to grow exponentially to around 54 GWh by FY27 and later to about 127 GWh by FY30,” it added.

The substantial growth in demand is primarily driven by expected increase in EV penetration and decarbonisation of electricity grids, supported by ambitious government targets and policies/ incentives from both central as well as state governments.

“The demand for lithium-ion battery storage in India is expected to grow significantly, driven predominantly by migration towards EVs and renewable energy storage requirements. Consequently, India’s dependence on imports is expected to decline sharply to around 20 per cent by FY27 from near-full dependence presently, due to giga-size integrated battery capacities coming onstream in India,” Shah noted.

Hitherto, there was slow progress on domestic capacity additions for manufacturing lithium-ion batteries due to continuously declining costs driven by evolving technology. However, domestic capacity for Li-ion battery manufacturing is now expected to pick up on the back of an understanding that the lithium-ion technology has now fairly matured, he explained.

Government policies and incentives are expected to support build-up of giga-scale lithium-ion battery capacities, aided by Advanced Chemistry Cell (ACC) Production Linked Incentive (PLI) scheme, along with various state government incentives such as capital subsidies, electricity tax and stamp duty exemptions and interest subvention.

The government has already allocated 40 GWh of integrated battery capacities under the PLI scheme, with the remaining 10 GWh expected to be awarded shortly. 

Additionally, existing conventional battery manufacturers and few other companies in India are expected to set up battery capacities outside of the PLI scheme. A large portion of these capacities is expected to come onstream gradually by FY27.

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