India's Newly Discovered Lithium Reserves – A Boon for the Domestic EV Industry

India's domestic lithium battery manufacturing sector is in its infancy and mostly reliant on the imports of Li-ion cells, which are only assembled into lithium-ion batteries in India. In the next five to six years, demand for Li-ion batteries is anticipated to increase due to the government's goal of achieving widespread EV adoption by 2030. The recently discovered lithium reserve in J&K and Rajasthan is projected to reduce India's reliance on raw material imports and propel the domestic Li-ion battery manufacturing industry, which would ultimately have a beneficial impact on EV adoption.

Demand for EVs is growing as vehicle buyers in India are choosing it over ICE vehicles. In 2022, 442,901 EVs were sold, an ~80% increase from the previous year. The government expects EV share to reach 30% in private vehicles (PVs), 70% in commercial vehicles (CVs) and 80% in 2- and 3-wheelers by 2030.

However, to meet this target, India’s EV adoption rate will have to increase substantially from just over 4% in 2022. Apart from a current underdeveloped charging infrastructure, higher cost of EVs compared with ICE counterparts is a critical restraining factor for the low penetration.

The high cost of EVs is attributed to the batteries, which are the most expensive components, accounting for around 40% of the vehicle cost. As India currently does not have domestic battery production facilities, EV manufacturers import Li-ion batteries or Li-ion cells primarily from China and Taiwan (approx. 70%).

Although there are just over 1.3 million EVs on roads, the government aims to achieve mass adoption of EVs by 2030. To meet this target, overall demand of Li-ion batteries must grow from 72 GWh in 2022 to 576 GWh by 2030.

To make India future-ready and have domestic EV battery manufacturing capabilities, government undertook several initiatives:

• Production-linked incentive (PLI) scheme by the government supports the development of advance chemistry cell (ACC) battery domestic manufacturing.
• Exemption of customs duty on import of capital goods and machinery for Li-ion cell manufacturing for EV batteries.
• Subsidizing EVs under the faster adoption and manufacturing of hybrid and electric vehicles (FAME) Phase-II scheme.
• Investing USD 5 billion to set up mega factories for Li-ion cell and battery manufacturing with capacities up to 50 GWh.

Currently, India sources around 54% of its lithium requirement from China. During 2020–21, approximately $730 million worth of lithium was sourced, of which lithium totaling around $426 million was imported from China.

The recent discovery of 5.9 million tons of lithium reserves in J&K (Reasi district) and the latest find in Rajasthan (Degana municipality in Nagaur district) are a boon for the country and offer a much-needed impetus to the Li-ion cell and battery manufacturing industry.

The reserve in J&K, if completely converted to battery grade lithium, can support up to 6 TWh of cell production and would address the issue of insufficient raw material availability. Moreover, the newest reserve found in Rajasthan is considered to have even higher capacity than that of J&K’s, which is expected to meet around 80% of the country’s lithium demand.

To scale up and expedite domestic manufacturing, it is critical to initially focus on the following:

• Increasing battery cell component (active anode and cathode materials) manufacturing. India can leverage the vast experience of its chemical industry for meeting domestic as well as export needs.
• Developing unique chemistries of Li-ion cells using minerals that have no geographical constraints to avoid supply-chain risk and increase domestic value capture.
• Choice of battery chemistry to balance raw material cost as the prices of materials like iron, phosphate, manganese, nickel, and cobalt used in Li-ion cell production are anticipated to increase further during this decade.
• Li-ion battery recycling, as this will aid raw material procurement and support the new Li-ion battery manufacturing industry.

Hence, to achieve the desired mass adoption level of EVs, India needs to strengthen its domestic Li-ion cell & battery manufacturing infrastructure and start exploring lithium reserves in J&K. However, before that, India needs technological expertise and additional infrastructure to be able to extract, process, and refine its lithium reserves, which is mixed with rocks and other minerals.

Australia has similar reserve where lithium is mixed with bauxite. Technology tie ups with other nations having expertise in this field seems to be the way forward to expedite the development of India’s domestic lithium battery manufacturing industry.