Indian EV eco system

 

India's EV Policy The NITI Aayog, India's policy think-tank, has given several suggestions to the Government of India with respect to EVs. Accordingly, the following policy has been enacted: Reduce primary oil consumption in transportation. Facilitate customer adoption of electric and clean energy vehicles. Encourage cutting edge technology in India through adoption, adaptation, and research and development. Improve transportation used by the common man for personal and goods transportation. Reduce pollution in cities. Create EV manufacturing capacity that is of global scale and competitiveness. Facilitate employment growth in a sun-rise sector Government adopted the Faster Adoption and Manufacturing of Hybrid and EV (FAME) scheme in 2015, with an allocation of Rs. 895cr, which provided subsidies for e-2Ws, e-3Ws, hybrid and e-cars and buses. The FAME II scheme, which came into effect from April 2019, had a proposed spending of Rs. 10,000cr. It was to be used for upfront incentives on the purchase of EVs (to the extent of Rs. 8,600cr and for supporting deployment of charging infrastructure (Rs. 1,000cr).

Source: Department of Heavy Industries, Ministry of Heavy Industries and Public Enterprises, Government of India

The EV Ecosystem

Source: Avendus Capital Pvt Ltd

Policy: The FAME II policy is India's first step towards boosting EV penetration in India, though a lot needs to be done. The Government has taken baby steps by introducing e-buses for public transport in some cities. EVs for private use will go up once there are incentives, subsidies and other such measures. Batteries: Battery cost is nearly 40% of the cost of the vehicle, hence reducing the same is key to increasing EV adoption. Raw materials for battery manufacturing - mainly Lithium and Cobalt - are not available in India, hence raw material dependency will continue (currently India imports crude). Currently Indian companies only assemble imported battery packs, do not manufacture batteries.

Source: Times of India

OEM: Most OEMs are focused on specific sub-segment of the automobile space. 2Ws have seen the most momentum, given that nearly 79% of Indian auto market (by volumes) comprises of 2Ws. E-3Ws have started by way of e-Rickshaws while e-4Ws are gaining prominence in shared mobility.

Source: Trade Brains

Grid: There are two major issues that grids have to address Ability to handle peak load Grid composition must be ideally dependent on renewable generation rather than coal dependent generation. Charging Infrastructure: India will need to simultaneously develop home charging and public charging infrastructure to boost EV adoption. The government has been pushing for EVs through introduction of Fame I & II policy with a major focus on charging infrastructure. The government, under FAME II policy approved setting up of 1633 fast charging stations and 1003 slow charging stations across 62 cities, 24 states and union territories in Jnuary 2020. FAME I added 314 charging stations in India, FAME II 2,867

Source: FADA

Customers: EV adoption in India is highest in the public transport (buses) and shared mobility. E-2Ws have been the next ones to begin adopt since cost differential between ICE 2Ws and EV 2Ws is lower than 4Ws. Lithium ion price reduction - the biggest enabler While demand for Lithium is expected to increase with growing EV adoption, prices, surprisingly have continued to fall continuously. Over the past ten years (2010 - 2020), Lithium prices have dropped 88%. This is due to the following reasons: Annual supply of Lithium is expected to grow from 2,15,000 tonnes in 2019 to 7,15,000 tonnes in 2025. This will be led by new supply from Argentina, Australia and Chile. Three new mines are set to come up in North America in next couple of years, taking its share in global supply to 5% by 2025. New mines and increased production have brought a glut of material to market, hammering lithium prices.

Volume Weighted average of lithium ion battery price (USD) Lithium production to triple between 2019 and 2025 Lithium Reserves by country (In Million Metric Tons)

While lower Lithium prices is music to ears of Auto OEMs, it is bad news for miners of the metal. Lower prices means that investments into mining may become less profitable, reducing the pace of new investments. The pandemic reduced demand for EVs, hereby depressing prices further. However, the free fall in Lithium prices is expected to get arrested by 2022. Several global companies have delayed or postponed expansion plans due to depressed demand currently. Some examples of postponed projects are: Chile's SQM, the world's second-largest Lithium producer, postponed key expansion at its Atacama salt flat operations from the end of 2020 to late 2021. Australian company Wesfarmers delayed its investment decision on the Mount Holland project in Western Australia by a year, to early 2021. World leader Albemarle postponed its project to buy 1,25,000 tonnes of processing capacity. It also revised a deal to buy into Australia's Mineral Resources' (ASX: MIN) Wodgina lithium mine and said it would delay building 75,000 tonnes of processing capacity at Kemerton, also in Australia. (Source: Mining.com) China's Tianqi Lithium Corp., the country's top producer of the battery metal, also postponed commissioning the first phase of its flagship plant in Kwinana, as it struggles to pay back debt. (Source: Mining.com) Reference: Research and Ranking -Prashant Gorakhnath Patil