How India is becoming Favoured Destination to set up Lithium-Ion Batteries Plant used in EVs

India is making a big push for electric vehicles, signalling a turning point in its clean energy policy. While in 2017, the Indian government had announced its intent to shift to 100% electric vehicles cars by 2030, in March this year, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles or FAME 2 scheme--to expand commercial vehicle fleet--was also announced with an outlay of INR 10,000 crore. Amid this strong push by the government to make India a global manufacturing hub for electric vehicles and components, many companies globally are now taking keen interest to set up lithium-ion battery plants in the country, which is a key component for the EVs.

According to a conservative scenario envisaged by NITI Aayog, India will need six gigawatt-scale facilities (of 10GWh each) by 2025 and 12 by 2030. While this doesn't include the export market potential, the base scenario envisions 11 such giga factories by 2025 and 24 by 2030.

Major investments by the global players

Last week, Japanese majors Suzuki Motors, Toshiba and Denso have formed a consortium to set up a lithium-ion battery and electrodes plant in Gujarat and the market sources claim that this will be the biggest battery plant in the world. While the total investment involved has not been officially disclosed by the consortium, the estimates are around INR 30,000 - 50,000 crore in a phased manner over eight years.

While Suzuki is a Japanese automobile major, Toshiba is a conglomerate that provides various services information technology, communications equipment and systems, and for electronic components, whereas Denso is a leading supplier of advanced automotive technology, systems and components for automakers. With Suzuki Motors being the leading partner in the consortium, the three companies will be in proportion of 50:40:10 between Suzuki, Toshiba, and Denso.

The consortium plans to purchase land close to Suzuki's Hansalpur plant. This proposed investment by the Suzuki-led consortium is in addition to Suzuki's current and proposed investment in its Hybrid cars plant where of about INR 8,000 crore.

Apart from this, Tata group has become the first company to buy land in the Dholera Special Investment Region (SIR) to set up 10 gigawatt lithium-ion battery plant. In fact as per the market sources, the company had paid first instalment of INR. 40 crore to buy land for its proposed lithium-ion battery plant.

Last month, Tesla and China's Contemporary Amperex Technology Co. Ltd (CATL) are among the companies that have shown an interest in the Indian government's plan to build large factories to make lithium-ion batteries at an investment of about INR 50,000 crore. Among the other firms that have shown an interest in the mega project is China's BYD Co. Ltd.

The state-run IOCL (Indian Oil Corporation Ltd) has also announced its set up a 1 Giga Watt (GW) plant to make batteries used for running electric vehicles (EVs) in partnership with an overseas start-up using a non-lithium ion raw material that is locally available. Th battery plant will be set up through a special purpose vehicle (SPV) formed by IOC and the overseas entity and although the location of the plant has not been decided yet, the unit will be built in phases beginning with 25MW or 50MW and ramped up.

Government's push to the industry

To encourage private sector investment in this sector, the government is looking at tax incentives for manufacturers and a basic customs duty safeguard from 2021-2030 for making advanced chemistry cells and battery in India. It may offer an output-linked subsidy on kilowatt hour of cells sold. India is also exploring a nearly USD 1 billion concessional loan facility to be drawn from multilateral lenders to boost battery storage plans.

To encourage sales of electric vehicles, the Goods and Services Tax Council last month decided to cut taxes on electric vehicles and chargers from 1 August. In the budget, the government announced tax rebates of up to INR 1.5 lakh for customers on interest paid on loans to buy EVs, with a total exemption benefit of INR 2.5 lakh over the entire loan period. The government also announced customs duty exemption on lithium-ion cells, which will help lower the cost of lithium-ion batteries in India, as they are not produced locally.