Tesla seconds India’s bid to build more battery factories amid the country’s EV push

Manufacturing EV batteries locally is a key piece to India’s all-electric future as it’ll make EVs more affordable.

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Tesla and two other Chinese companies, Contemporary Amperex Technology Ltd. (CATL) and BYD Co. Ltd., might be the beneficiaries of India’s plan to establish more battery factories as part of the country’s push towards a future of all electric cars (EVs).

According to a report in Mint, two government officials who did not wish to be named said the above-mentioned companies had shown interest in India’s ambitious plan to become a global hub for manufacturing electric vehicles (EVs) and its parts.

“We are expecting all cabinet clearances by September. Post that, the international tender will be floated. The EFC (expenditure finance committee) clearance has come. The evaluation won’t take much time. The minimum ceiling for bidding is 5GWh, with the maximum allowed quantum of 20GWh,” one of the government officials told Mint on condition of anonymity.

The final tender, however, is expected to be finalized by February 2020.

Battery cost accounts for around one-third of an EV. It makes lots of sense for the Indian government to push to localize the production of batteries so that EVs would be more affordable.

India is already in a vulnerable position as it imports more than 80% of its oil requirements and around 18% of its natural gas, and is always kept on supply chain tenterhooks. This explains the keenness of the Indian government to be self-sufficient in battery manufacturing for electric vehicles.

India’s policy push is to replicate what Tesla has done at its Gigafactory complex in Nevada, U.S., which is used to power its cars such as Model 3, S and X. Tesla is yet to launch its electric cars in India. According to its CEO, Elon Musk, “challenging government regulations” and “extremely high import duties” in India are the obstacles that are yet to go away any soon.

India levies 125% duty on imported vehicles to protect domestic automakers, even though recently, the goods and services tax (GST) on electric vehicles was slashed to 5% from 12%.

The latest GST rate slashes will increase the tax gap between petrol or diesel vehicles and e-vehicles. While fuel-run vehicles will attract 28% tax and additional cess based on vehicle size and engine capacity, the government has reduced tax for the EV chargers from 18% to 5%. The Government has announced to ban fuel-run three-wheelers, two-wheelers, and four-wheelers by 2023, 2025 and 2035 respectively.

According to India’s Ministry of Road Transport and Highways and government policy think-tank NITI Aayog, there is a need to increase the number of EVs running on India’s roads from the current less than a percent to nearly 30% by 2030.

The increase in demand for EVs from India would translate to increased dependence on China especially where lithium is concerned, which the Indian government wants to avoid on the basis of cost, supply, and trade issues. The solution seems to be looking at different alternatives to battery technologies such as polymer-based solid-state batteries. An estimate put forth by NITI Aayog, show that India will need six gigawatt-scale facilities (of 10GWh each) by 2025 and 12 by 2030.

Financial incentives offered to build the GWh factories include a USD 99 million direct annual subsidy plan, and zero import duty for lithium, iron, and cobalt, for capacity creation said an ET report quoting sources.

India needs close to 600 GWh battery capacity to reach 30% EV share on roads by 2030. Large Indian corporates such as Reliance, Adani, JSW, Mahindra and Hero group, along with Japanese heavy-weights like Suzuki Motors and Toshiba Corp have evinced keen interest in battery manufacturing. Each gigawatt hour (1,000 megawatt hours) of battery capacity can provide power to a million homes for an hour and can run around 30,000 electric cars.