Market Overview

The Indian lithium-ion battery market was valued at USD 1.66 billion in 2020, and it is expected to reach USD 4.85 billion by 2027, registering a CAGR of 17.23% during the forecast period of 2022-2027. The COVID-19 restrictions had a negative impact on, raw materials, such as lead, which witnessed a significant demand drop in 2020, thus, adversely affecting lithium-ion battery manufacturers in India. As per the International Trade Centre, lithium-ion accumulators' import value decreased to USD 1.05 billion in 2020 from USD 1.29 billion in 2019. Factors such as the decline in lithium-ion battery prices along with the emergence of new and exciting markets, i.e., electric vehicle and energy storage systems (ESS), for both commercial and residential applications are expected to be the major drivers for the lithium-ion battery market in India. However, the lack of prominent raw material reserves required for the manufacturing of lithium-ion batteries is expected to pose a challenge for local production and the market for lithium-ion batteries in the country.

·         The portable segment is expected to be the largest segment in the Indian lithium-ion battery market during the forecast period.

·         The increasing recycling activities of lithium-ion batteries in the country are expected to secure the supply of raw materials, such as lithium and cobalt, and reduce the reliance on extracting and refining materials from mineral resources is likely to create significant opportunities for India's lithium-ion battery market in the future.

·         India’s plans for increasing the adoption of electric vehicles are likely to drive the lithium-ion battery market in India.

Portable Segment to Dominate the Market

·         Lithium-ion batteries are commonly used in electronic devices, such as smartphones, laptops, clocks, watches, and remote controls. Sales of consumer electronics are very much dependent on the country’s population and disposable income. The increasing disposable income of India over the recent years has led to rising living standards, driving the demand for consumer electronics.

·         The lithium-ion battery technology offers much better energy density in joules of energy per kilogram than the previous battery technologies, such as nickel-cadmium (NiCd) and nickel-metal hydride (NiMH). Apart from that, the rate of self-discharge is much lower for lithium-ion cells than for other rechargeable cells, which has led to its increased popularity. Therefore, the availability of smaller batteries with better charge retention has become imperative for electronic devices' energy requirements.

• In recent years, the availability of the internet at extremely cheaper rates has increased smartphone penetration drastically in India. As of January 2020, the India Smartphone market surpassed the United States for the first time on an annual level, becoming the second-largest smartphone market after China globally, reaching 158 million shipments in 2019, with 7% YoY growth. This is due to the mid-tier segment's growth, where Chinese brands aggressively introduced many flagship-grade features and capabilities to capture demand coming from users looking to upgrade from their first or second smartphone. Additionally, online channels became the preferred selling platforms to introduce these products (Xiaomi, Realme, Vivo, etc.) faster into the market.
• According to the Telecom Regularity Authority of India (TRAI), India's overall teledensity decreased from 86.66 at the end of April-20 to 86.15 at the end of May-20. The Urban teledensity declined from 140.06 at the end of April-20 to 137.81 at the end of May-20. Rural teledensity increased from 58.85 at the end of April-20 to 59.23 at the end of May-20. The share of rural and urban subscribers in the total number of telephone subscribers at the end of May-20 was 45.19% and 54.81%, respectively.
• Additionally, the launch of favorable schemes, such as ‘’Make in India’’ and ‘’Digital India’’, is expected to significantly lower the cost of manufacturing consumer electronics, in turn becoming more affordable for the section of the population living in rural areas of the country, where consumer electronics penetration is low.
• Therefore, owing to the above points, the portable segment is expected to dominate the Indian lithium-ion battery market during the forecast period.

Cell manufacturing

The report highlights various compelling reasons for cell manufacturing in India. It states cell manufacturing costs in India, as of 2020, were the lowest (US$92.8/kWh) when compared with the United States, European nations, and even China (US$98.2/kWh) and South Korea (US$98.1/kWh). Similarly, India offers huge cost benefits in terms of cheap labor and power (gross monthly minimum wage levels in India in 2019 were US$65 against US$217 in China). On the demand side, falling battery prices and initiatives including the FAME scheme are encouraging EV adoption in India.

The report says “for now, India is likely to import all the raw materials required for cell manufacturing but can lower this dependency by entering into long-term contracts with raw material suppliers or acquiring some assets in mineral-rich nations. Local capabilities are also slated to be built up gradually.”
The report states challenges to cell manufacturing in India range from the unavailability of key raw materials to the requirement of huge investments and the absence of technological know-how. It suggests battery recycling as one of the alternate solutions to meet surging LiB demand. It will result in the recovery of 90% of lithium, cobalt, nickel, manganese, and graphite and put India on the path to a circular economy, the report adds.

“Overall, however, as India already has huge cost advantages in battery assembly and software-driven BMS capabilities, it can also realize significant benefits through a vertically integrated value chain once lithium-ion cell manufacturing booms. For cell manufacturing and battery pack assembly, the future looks promising in India provided issues like battery standardization and battery safety issues are addressed and the industry and government work in sync,” the report concludes.

Potential Indian Solutions

In the spirit of  Montu Electronics, there is a strong case for setting up an Indian battery manufacturing ecosystem. In this pursuit, studying the approaches taken by other regions, adapting them to the local context, and marrying them with unique domestic factors is critical. Efforts of policymakers, industry players, and broader stakeholders in the ecosystem must be coordinated for achieving this. This must be supported with demand-side measures to promote EV penetrations with carrots (e.g. tailored incentives for private and fleet buyers, charging infrastructure growth) and sticks (e.g. fuel economy/CO2 standards and EV sales targets for vehicle manufacturers, low pollution zones in cities).

The phased manufacturing strategy targets increasing vertical integration and localization in a stepwise manner. In the short term, Indian players must seek collaborations with global firms along the entire value chain. Securing long-term raw material supplies, especially for critical minerals like lithium, nickel, cobalt, and manganese needs urgent efforts and upstream partnerships. Concurrently, Indian OEMs must deeply contemplate which battery cell designs and chemistries are most suitable for local environmental conditions, vehicle specifications, and price-sensitive customer segments. For example, there is a growing consensus that batteries with LFP cathodes are better suited for volume segments and commercial applications, which also attenuates the demand for some critical materials.

At the same time, it is critical to fast-track battery research and development activities, fostering intensive cooperation between local universities and industrial firms. The battery design is crucial to control the technical specifications and performance parameters, ensure quality and reliability, and can be a core competitive advantage for OEMs. The abundance of young engineers and scientists in India can be tapped for leapfrogging in technology solutions as well as deployed in the jobs created while growing the local ecosystem. Indian MSMEs and industrial firms must also pivot to cater to the equipment and component that needs to be created in this process.

Further, India’s strength in information technologies offers the potential to develop intelligent solutions for managing batteries from cradle to grave. This would enable better utilization of batteries in first-life applications in EVs as well as second-life potentially in energy storage solutions. Finally, end-of-life waste management directives and extended producer responsibility norms, coupled with recycling efficiency targets, can help cell manufacturers proactively design and develop circular business models.

Though there are considerable and multifaceted challenges that need to be addressed, India has started taking the right steps in promoting domestic battery manufacturing. It is imperative to continue building on this through concerted efforts across the entire battery and vehicle value chains to promote the development of an entire local ecosystem together with global partners. The right measures can thus pave the road for accelerating India’s clean energy transition.