Viable Battery Costs Remain Critical to EV Penetration in India: Ind-Ra

Ind-Ra claims that battery remains the most critical component of an EV due to both cost viability (30-40 percent of EV cost) and technological expertise.

India Ratings and Research (Ind-Ra) in its latest market analysis has predicted (that driven by the economic slowdown induced by the Coronavirus pandemic) a delay in the penetration of electric vehicles (EVs) in the Indian automobile industry. And, among other factors, the analysts claim that battery remains the most critical component of an EV due to both cost viability (30-40 percent of EV cost is of battery) and technological expertise.

The analysis adds that the prices of batteries have dropped by around 85 percent over FY10-FY20 globally and are likely to decline further with better economies of scale. However, prices for Indian markets are higher than the global average due to lower volumes. Moreover, in India, the concentration is largely towards small batteries (1-30kWh), while the global average is 60kWh; smaller batteries have a higher per kWh price.

The Indian e-PV market is largely dominated by Tata Motors Limited and Mahindra & Mahindra, catering to the demand generated under Energy Efficiency Services Limited. In FY20, OEMs such as Hyundai Motor India Limited and MG Motor India Private Limited have entered the Indian market with their EV models. Tesla, Inc., the largest EV OEM globally, has announced to enter into the Indian market by FY22.

“With large EV OEMs entering into India, battery pricing should reduce due to their ability to source batteries at competitive rates,” adds the report.

The analysis also states that with the current level of reliance on imports, localisation of the EV segment in India could take even longer now thanks to the added slowdown induced by the pandemic.

It adds that EV components are largely imported except body / chassis. The government has laid out a Phased Manufacturing Program to promote localisation of EV components. Amid COVID-19, the government has extended the deadline for local manufacturing, to be eligible for incentives under FAME-II scheme, for auto parts such as electronic throttles, motors and compressors to April 1, 2021, from the earlier deadlines ranging between April to October 2020.

However, India lacks meaningful resources of lithium and cobalt, which are the key raw materials for a lithium-ion battery. Moreover, significant capital expenditure is required to establish battery manufacturing facilities, undertake research and development and develop required expertise, which is difficult in the current scenario and can only be justified with a larger scale. Hence, Ind-Ra expects that it would be limited to assembling battery packs in the near to medium term while the manufacturing of batteries may take longer. The other components of EVs could be localised in India as the overall volumes go up. Indian auto ancillaries have made several tie-ups to enter into the EV space. While some of these are also supplying to global EV OEMs, the overall number is fairly small.

Most of the components for an EV are imported from China; supply-side risks are high, given the current geopolitical tensions with China.

Also read: Pandemic to Delay EV Penetration in India; 2Ws in the Clear: Ind-Ra

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Ayush Verma

Ayush Verma

Ayush is a staff writer at saurenergy.com and writes on renewable energy with a special focus on solar and wind. Prior to this, as an engineering graduate trying to find his niche in the energy journalism segment, he worked as a correspondent for iamrenew.com.

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