EV car charging

Moving towards Gigafactories

The Advent of a Domestic Battery Industry in India

The emerging enthusiasm around battery manufacturing in India is palpable and signals the advent of battery manufacturing in the county. Ten companies have moved bids amounting to 130 GWh under the ₹18,100 crore production-linked incentive (PLI) scheme for advanced chemistry cell (ACC) battery storage, far exceeding the 50 GWh envisaged under the program.

This push towards domestic cell manufacturing is almost half a decade in the making and must be situated within the context of an increasing momentum towards vehicle electrification and grid decarbonization. To aggressively shift towards renewable energy, energy storage, and EVs, the Government announced at COP26 a target of 500 GW of non-fossil fuel energy deployment by 2030. Central and state governments have been signalling strong support for electric vehicles through FAME II, the Auto PLI Scheme, and other supportive policies, including the pledged target of EVs comprising 30% of new vehicle sales by 2030 as part of the EV30@30 campaign of the Clean Energy Ministerial.

Both these pushes are expected to translate to a burgeoning demand for ACC batteries. RMI India and NITI Aayog’s assessment indicates battery demand will rise to between 106 GWh to 260 GWh annually, in the conservative and accelerated demand scenarios. While much of the battery demand is expected to materialize from EVs (up to 40% by 2030), the need for effective renewable integration will accelerate demand growth in the long run. These are in addition to demand for batteries from consumer electronics, which will only grow as the Indian middle class expands and becomes more prosperous. Looking beyond 2030, with the cost of batteries falling, many end-use applications will increasingly become economically viable. This trend will only accelerate as battery performance improves and prices decline.

Beyond decarbonization, domestic battery manufacturing is crucial for energy security. India is dependent on imports for much of its energy value chain — not only commodities like crude oil and natural gas but also products like solar panels and lithium-ion batteries, which are central to decarbonization. As the energy transition accelerates, domestic battery manufacturing will be critical to ensuring a greater degree of energy security for the country. Although batteries will still require raw material imports, a majority share of the value of battery manufacturing can still be captured within the country with the deployment of the right manufacturing, recycling, and supply chain strategies. This also signals an opportunity for research and development investments around niche battery chemistries that could elevate some of the raw material concerns while positioning India for leadership in the next stage of battery innovations.

The momentum for battery manufacturing is not unique to India. Given the global push towards decarbonization, many countries are already moving quickly to establish manufacturing pre-eminence in the battery storage space. China has been the fastest mover, currently responsible for 78% of global battery manufacturing capacity. The United States and Europe follow suit with 8% and 7% of current manufacturing capacity respectively. If India doesn’t act now, it risks losing out on one of the most critical industrial opportunities of the 21st century. It also risks becoming wholly dependent on another set of imports for its energy value chain – one that will also impact the viability of its EV manufacturing industry in the future.

Battery manufacturing thus presents an opportunity to partake and become a leader in a global sunrise industry and accelerate indigenization of the energy and transport value chain. The PLI scheme is a crucial step in competing with the surging investments in battery manufacturing in China, Europe, Southeast Asia, and the United States. It promises to put India in a strong position in the global market and let the country realize the full value from this technology. The strong response of the private sector to the scheme only attests to the urgency of the issue and the opportunity it represents.

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