India’s battery demand is poised for an impressive 19-fold increase, growing from just 13 GWh in 2024 to a staggering 244 GWh by 2035. This growth will be driven by the burgeoning demand across various segments, including passenger EVs, two- and three-wheelers, commercial EVs, e-buses, and stationary storage systems. The distribution of demand in India is notably more diverse than global patterns, where passenger EVs typically dominate. This scenario creates a lucrative opportunity for both local and international battery manufacturers to establish or expand their operations in the country.
Presently, India’s lithium-ion battery manufacturing capacity is still in its nascent stages, with only 6.7 GWh of nameplate capacity commissioned by the end of 2023. This capacity, supported by players like Lucas TVS-24M, Qmax Ion, ITP Group, and TDSG, accounts for about half of the anticipated battery demand in 2024.
However, the landscape is set to change dramatically, with companies announcing an additional 246 GWh of nameplate manufacturing capacity through to 2035. The key players leading this expansion include Reliance Industries, JSW Group, Amara Raja, and Ola Electric Mobility.
Despite the promising outlook, it is a common knowledge that capacity growth does not always align with the announced figures. Factors such as delays in plant commissioning, the maturity of the Indian market, and the experience of domestic manufacturers could impact the timely realisation of these targets. In China, for instance, utilisation rates for lithium-ion manufacturing facilities averaged just over 40% in 2023, with the top five producers operating at over 60% capacity. Similar scenarios in India could lead to supply shortages if local production fails to meet the accelerating demand.
Piquantly, though, India has the potential to become a competitive hub for lithium-ion battery manufacturing, particularly for lithium iron phosphate (LFP) cells. Combining Production Linked Incentives (PLI), lower production costs, and import tariffs, Indian-made LFP cells could be up to 50% cheaper than those manufactured in China. This cost advantage is derived from a combination of factors, including up to some $24/kWh in PLI support, which three companies have secured to date.
Importantly, the domestic production advantage is a major driver for the 167 GWh of new capacity announced since 2023, representing 63% of all planned future capacity in India. Despite these benefits, Indian manufacturers still face stiff competition from Chinese imports, given the relatively low logistics costs (of around $1.2/kWh) for transporting batteries to India when compared with Europe (close to $8/kWh).
India’s PLI scheme for Advanced Chemistry Cells (ACC), launched in 2021 with $2.16 billion in funding, has become a cornerstone of the country’s battery manufacturing strategy. The PLI provides a subsidy of up to $23.9/kWh for manufacturers meeting the scheme’s rigorous requirements, which include achieving a domestic value addition of 60% within five years and maintaining a minimum investment of $27 million per GWh of committed capacity.
The subsidies are distributed quarterly between 2024 and 2029 and can support up to 50 GWh of annual production. Beyond the initial 50 GWh, the government aims to support an additional 5 GWh of next-generation technologies, potentially including solid-state batteries.
However, despite the scheme’s incentives, only three companies have been awarded the subsidies so far: Ola Electric Mobility (20 GWh), Reliance Industries (5 GWh), and Rajesh Exports (5 GWh). These firms are expected to focus primarily on batteries for EVs and two- and three-wheelers. The remaining 20 GWh, originally allocated to Hyundai Global Motors, fell through in 2022, and a recent tender for 10 GWh was awarded to Reliance, leaving 10 GWh still unallocated.
While talking about the cost structure, it is worth nothing that the battery materials, especially the cathode, typically represent the largest cost component in a lithium-ion cell. However, falling lithium prices have shifted the cost structure, making labour, land, and construction more prominent factors in the entire value chain. In India, where these inputs are relatively low-cost, the potential for producing batteries at a competitive rate is high.
For instance, LFP cells produced in India at over $45/kWh can be some $3.5/kWh cheaper than those manufactured in China, and significantly more affordable than cells made in Germany or the US, both of which exceed $60/kWh. The key to achieving this cost efficiency will be scaling up production to multi-gigawatt levels and localising the entire supply chain.
The Indian government’s efforts to localise battery production extend beyond the PLI scheme. Import tariffs on lithium-ion cells used in EVs currently stand at 5.5%, with an 18% GST applicable to both imported and locally produced cells. These levies amount to 24.5% for imported cells, making local production more attractive. However, the import duty was reduced from 20% and is set to expire by March 31, 2026. With these policy levers, India is positioning itself as a low-cost manufacturing hub, but the challenge will be to build a robust local supply chain to maintain these advantages as competition intensifies.
India’s growing battery manufacturing capacity presents an opportunity not only to meet domestic demand but also to export to regions like Europe and North America. The open market approach in Europe has been beneficial for Chinese manufacturers, and Indian battery makers could also target this market if they can produce a surplus. In North America, however, the competitive landscape is more challenging due to the substantial $35/kWh production tax credits for US-made cells.
To become a global player, Indian manufacturers will need to balance domestic supply with export potential, while navigating a rapidly evolving policy environment. The next decade will be pivotal in determining whether India can transform itself into a lithium-ion battery powerhouse, reducing its reliance on imports and securing a prominent position in the global supply chain.
With a rapidly growing battery demand, competitive production costs, and strong government support through the PLI scheme, India is poised to become a significant player in the global battery manufacturing landscape. However, the road ahead is fraught with challenges, including the need for timely project execution, supply chain development, and the ability to compete with established international players. If these hurdles can be overcome, India has the potential to not only meet its domestic needs but also become a major exporter of lithium-ion batteries to Europe and beyond.
The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.
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