A new report by Axis Capital Research has observed that a progressive recasting of the Production-Linked Incentive (PLI) scheme for battery manufacturing is critical to spur EV battery making in India. Based on a several-month-long study of the evolving global EV battery ecosystem and global OEM strategies, the report highlights that China controls 65-70% of global battery capacity and 55-85% of global supply of battery components.
India’s localisation efforts have been hobbled by tech and restrictive incentives. The OEMs in the country are likely to follow their global counterparts in taking control of battery supply. The report also highlights high incentives to drive EV adoption and 250 GWh battery demand by FY33E. Incentives comprise of approximately 30-40% of the pre-subsidy price of EV PVs and 2Ws (higher than global markets). Overall incentives will cost the exchequer INR 1.8 tn over FY23-28E, even as higher incentives drive EV penetration to 50% by FY33E.
Sufficient scale, localisation, and innovation can reduce EV ownership costs in the next five years to significantly lower the need for incentives. India will need capex of nearly $30-33 bn (excluding major backward integration) to build the required Li-ion battery capacity of 330 GWh (250 GWh demand, 75% utilisation) in the next decade (70-75% of demand just for LFP).
The report concludes that India needs to take several steps to spur EV battery making. This will primarily require overhauling the PLI scheme for battery manufacturing to make it more attractive to global and domestic players. Also, there is a need to provide additional support to domestic cell manufacturers to help them overcome their technological limitations and create a more conducive environment for investment in battery manufacturing, including by addressing issues such as land acquisition and regulatory approvals.