India does have existing production and significant growth potential in specific segments of the battery supply chain, especially as some countries seek to diversify their supply chains away from China due to geopolitical concerns.

India can climb the global battery supply chain ladder. Here’s how.

While India’s present role across the global battery supply chain is negligible, India could become a notable producer of certain goods in the global battery supply chain through international collaboration, says a new paper

India could help advance the global electric vehicle transition by producing certain goods in segments of the global battery supply chain, according to a research paper from Observer Research Foundation America (ORF-A). The analysis looked at India’s present and potential role in the global supply chain for electric vehicle batteries. 

At the moment, China dominates most parts of the global battery supply chain, leaving India with no sizable production share. In 2020, 40–50% of the cobalt produced in the Democratic Republic of the Congo was controlled by Chinese businesses. The majority of the world’s manufacturing of most precursor materials and cell components, such as separators, electrolyte salt, cathode material, and anode material, is produced in China. In addition to being the world’s top battery manufacturer, China also leads the world in battery recycling, the paper said.

India does have existing production and significant growth potential in specific segments of the battery supply chain, especially as some countries seek to diversify their supply chains away from China due to geopolitical concerns. 

However, the road to secure a significant spot in the supply chain is long for India as many challenges come in the way.

Challenges in India’s way

To begin with, India lacks reserves of nickel, cobalt, and lithium, which are high-cost raw materials in electric vehicle batteries. Extensive exploration, which could take years, may be required before India’s resources can be qualified as reserves. Even then, more years and capital will be required to convert the reserves into mined ore. 

Furthermore, capital-intensive production facilities that need hundreds of millions to billions of dollars in upfront capital investment are found across the battery supply chain, from mines to gigafactories. For instance, Zhejiang Huayou Cobalt of China spent $422 million to purchase a hard rock lithium mine in Zimbabwe and constructed a $300 million concentrating facility that can turn 4.5 million metric tonnes of lithium ore into lithium concentrate yearly. An estimated $4 billion will be spent on Panasonic’s battery cell plant in Kansas, which will generate 30 GWh of battery cells a year. Mines and processing plants are examples of upstream production facilities, and it can take several years for them to start turning a profit. The average time it takes to find a deposit and start producing commercially from a mine is 16 years worldwide. 

Finally, each stage of the EV battery supply chain, from extraction to battery pack manufacturing, calls for specialised knowledge, which demands a substantial monetary and time investment. In its 2001 five-year plan, the Chinese government started giving research and development of electric vehicle technology top priority. The Chinese government began heavily subsidising the business in 2009, and between 2009 and 2022, it is predicted that subsidies will total $29 billion. It will be difficult for Indian businesses and the government to swiftly establish local manufacture in the battery supply chain.

Mapping out India’s potential 

While it provides other raw materials like copper, graphite, and manganese that are required in the battery supply chain, India does not produce lithium, nickel, or cobalt. While it has experience generating other precursor materials like aluminium, refined copper, and phosphoric acid, India is not able to handle certain precursor materials, such as lithium carbonate. The majority of cell components are currently not produced in India either, although Indian businesses are working to increase their ability to produce anode material and other cell components.

Similarly, India does not have sizable production capacity for battery cells, accounting for less than 1% of global capacity. Having said that, the paper noted, Indian companies are building battery cell production facilities.

India has significant production potential for battery packs in two- and three-wheeled electric vehicles because upstream domestic production is incentivised by downstream domestic demand. Additionally, India already assembles battery packs for various types of electric vehicles and enjoys government subsidies for the purchase of such vehicles. Finally, India has a strong electronic waste recycling industry despite lacking a sizable specific capacity for recycling batteries used in electric vehicles, like most other nations.

International cooperation is the way to go 

The paper recommended that India could import end-of-life batteries from other countries and process them into black mass domestically for domestic use or export them to other markets.

Regarding capital requirements, the document stated that nations looking to invest in their mining industry might approach the central government of India for funding. Via Khanij Bidesh India Ltd. (KABIL), a joint venture for vital minerals, India is looking to participate in foreign mineral resources. India may also collaborate with other member governments to invest in foreign mineral projects, or it may use its membership in the Minerals Security Partnership to screen foreign mineral ventures for investment. The strongest candidates for Indian investment are those that have mineral resources but don’t have much local capital or are looking for non-Chinese investment, like Australia and some African nations.

Battery supply chain projects in India could receive financial support from international financial institutions and other governments’ development financial institutions in the form of project loans and other financial products, such as loan guarantees, insurance against political risk, support for infrastructure investments, and grants for feasibility and environmental impact studies. Other financial actors, including the private sector, are likely to be more inclined to provide financial support for a project if it receives support from international financial institutions since they see the initiative as partially de-risked. 

Specifically, the paper noted, the Japan Organization for Metals and Energy Security (JOGMEC)  may be interested in investing in Indian projects for raw materials and precursor materials as it has invested in several mineral-related projects overseas. The Japan Bank for International Cooperation (JBIC) is already financing an electric vehicle project in Uttar Pradesh.

The paper also said that India and other countries could increase their university-to-university and government-to-government research collaboration—the resulting innovation from this research collaboration could be made available to commercial entities in India and the collaborating countries.

Due to the capital intensity of battery supply chain projects, funding would be essential for building production capacity in India in addition to boosting international commerce of battery materials and homegrown technological competence.

The study concluded that commerce, investment, cooperation in research, and funding from development finance organisations could all work together to help include India and its businesses in the global supply chain for batteries for electric vehicles.

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