Teji Mandi Explains: Will PLI scheme for battery cells pave way for China-style Giga factories in India?

India has rolled out an ambitious PLI scheme to support ACC battery manufacturing facilities in India. With this scheme, the country is eyeing to set up 50 giga factories in India over the next 2-3 years. It will fuel the growth of the domestic electric vehicle industry.

Teji MandiUpdated: Friday, May 14, 2021, 05:26 PM IST
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The Union Cabinet has approved a PLI scheme worth Rs 18,100 crore to manufacture batteries for electric vehicles. The funds would be utilised towards incentivising the manufacturers. And set up 50 gigawatts/ hour (GWh) manufacturing capacity in India.

Major Policy Announcements

As per the policy document, the ambitious target would need an estimated investment of Rs 35,000 crore. And it is in line with Tesla's estimated Capex plan to set up the battery manufacturing unit in China.

In order to qualify for the scheme, the bidders will need to install an Advanced Chemistry Cell (ACC) Battery manufacturing capacity between 5 GWh and 20 GWh within five years from the appointed date. They will also have to make a minimum of 60% value addition at the project level in five years. Or 25% value addition at the mother level in the first year.

The incentives under this scheme are capped at Rs 2,000 per kWh. It will be decided on a case-to-case basis. The incentives can be claimed based on committed capacity, scale-up, and domestic value addition.

Rising Need for Battery Infrastructure

The government's favourable policies are working as a key enabler for the shift towards EVs. Some OEMs have planned to launch new electric vehicles over the next few years.

As per a Kotak Institutional report, ~28% of automobiles are likely to shift to electric and plug-in hybrid by FY2030. Scooters and three-wheelers are likely to adopt it faster than other modes of operations. By FY2030, ~50% of the scooters and three-wheelers and ~30% of the motorcycles are expected to shift towards electric. It will need a strong battery infrastructure in the country.

Citing the favourable scenario, the Indian electric vehicle industry will need 15 GWh of battery capacity by FY2025E and 60 GWh of battery capacity by FY2030E. As the situation stands, India's dependency on imported Chinese batteries is a major hindrance to the development of the EV industry. It elevates the cost of producing electric vehicles. Currently, imported batteries form 40-45% of overall vehicle production costs.

Keeping that in mind, the PLI scheme for ACC batteries is a significant step to speed up the switch towards electric vehicles. It is also critical to curb pollution and reduce dependence on oil imports.

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