Currently, domestic lithium-ion battery storage demand of 15 GWh is being almost entirely met through imports of lithium-ion cells/batteries. CareEdge Ratings expects Li-ion battery demand to grow exponentially to 54 GWh  by FY27 and later to 127 GWh by FY30. The substantial growth in demand is primarily driven by expected increase in EV penetration and decarbonisation of electricity grids, supported by ambitious government targets and policies/incentives from both central as well as state governments.  

The GoI has taken initiatives on several demand-side measures, such as Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, Viability Gap Funding (VGF) scheme for Battery Energy Storage System (BESS), helping to bring down cost of EV and BESS, thereby stimulating demand.  

The GoI has set the target of achieving 30% EV penetration by 2030 (as a % of annual sales). However, CareEdge  Ratings has considered a 20% EV penetration by FY30, considering the slower-than-anticipated EV adoption in 4- wheeler segment, amidst consumer preference for hybrid 4W vehicles and the slow progress in EV charging  infrastructure. In case of BESS, CareEdge Ratings expects cumulative grid level energy storage capacity to reach  around 100 GWh by FY30. 

Government policies and incentives are expected to support build-up of giga-scale lithium-ion battery capacities,  aided by Advanced Chemistry Cell (ACC) Production Linked Incentive (PLI) scheme, along with various state  government incentives such as capital subsidies, electricity tax and stamp duty exemptions and interest subvention.  The GoI has already allocated 40 GWh of integrated battery capacities under the PLI scheme, with the remaining 10 GWh expected to be awarded shortly. Additionally, existing conventional battery manufacturers and few other  companies in India are expected to set up battery capacities outside of the PLI scheme. A large portion of these capacities is expected to come onstream gradually by FY27. CareEdge Ratings expects India’s import dependency  to decline to 20% by FY27, thanks to these capacity additions. 

“The demand for lithium-ion battery storage in India is expected to grow significantly driven predominantly by  migration towards EVs and renewable energy storage requirements. Consequently, India’s dependence on imports  is expected to decline sharply to 20% by FY27 from near-full dependence presently, due to giga-size integrated  battery capacities coming onstream in India. Hitherto, there was slow progress on domestic capacity additions for  manufacturing lithium-ion batteries due to continuously declining costs driven by evolving technology. However,  domestic capacity for Li-ion battery manufacturing is now expected to pick up on the back of an understanding  that the lithium-ion technology has now fairly matured. Also, Li-ion chemistries rely heavily on scarce minerals such  as lithium, cobalt, nickel etc., wherein India has limited natural reserves. Therefore, domestic players need to  secure long term supply sources from countries having sizable reserves along with focus on battery reuse and  recycling, which shall provide environmental benefits and reduces price and supply risk associated with imports of  these minerals. Furthermore, the relative cost-competitiveness of Indian manufacturers, in the context of capacity  addition and pricing policy of large global integrated players especially Chinese manufacturers, will be a key factor  to monitor” said Hardik Shah, Director, CareEdge Ratings.