Demand has been a thorn in the government’s side ever since it launched demand-side incentives under the Faster Adoption and Manufacturing of Electric Vehicles in India-I scheme (FAME-I). Under FAME-II, the government rejigged the subsidy structure and introduced import duties on core battery parts (The Ken has written about this previously). The intention was to spur both the demand and supply of EVs. But it ended up subsidizing only premium electric vehicles (like Ather’s scooters), say two industry experts The Ken spoke with.
Impact and dependency of the schemes
Despite li-ion cells having a range of applications beyond EVs, Niti Aayog has pegged transportation as their largest use case— chiefly because of their dependence on schemes like FAME-II to drive demand. This might as well be the weakest cog in this multi-billion dollar effort.
“We haven’t been able to sign a single contract with a local EV manufacturer who can assure demand for lithium-ion cells,” says the Gurugram-based executive quoted above. The company the executive works for has dropped its investment plans, for now, citing demand of barely 100-200 MW (megawatt).
Niti Aayog agrees it’s a concern. “But these are unprecedented incentives and there are enough signals in the policy that demand can be generated,” says a member of the think tank confidently.
Contrary to what the government believes, demand clearly trumps subsidies for global players like Panasonic. While the company has publicly thrown its hat into the ring, the Panasonic executive says that there has been little intention internally to move into manufacturing immediately.
This runs counter to the government’s best-laid plans, which intend to award tenders—by April 2020 at the latest—and achieve a fully-local value chain by 2024.
While this demand-supply issue is a macro problem, the policy falters even at the cellular level.
The heart of a lithium-ion cell is the cathode, usually a complex mix of minerals like nickel, manganese, cobalt and phosphorous. The combination of these chemicals used determines the life-cycle, safety, and range of a battery.
Mass adoption an ideal solution?
There’s still no last word on what constitutes an ideal lithium-ion battery. Its chemistry is critical for India’s mass adoption of EVs.
Currently, the most widely used is the nickel-manganese-cobalt, or NMC, combination. In fact, as one Hyderabad-based battery expert points out, the Indian market is still using NMC 145, a first-generation battery. He wished to comment anonymously as he consults various battery manufacturers.
NMCs are widely used in China, but their pace of research and development on li-ion cells means a constant improvement in specifications. At $135 apiece, Chinese NMCs are cheaper than other battery types but aren’t the best option when it comes to India, as road temperatures are 10-degree Celsius higher than China. NMCs aren’t stable at higher temperatures of 45-55 degrees. They are especially unsuited to 2- and 3-wheelers, which don’t have elaborate cooling mechanisms.
And despite repeated claims of being agnostic about the type of chemistry used, the Indian government has a soft spot for NMCs. “Output-linked subsidies” in the plan are connected to the energy density and life-cycle performance of a battery.
Battery manufacturers who’ve seen the draft plan are uncomfortable with this. “The government should not embed these technical requirements in the policy. India’s transport needs are unique. Simply copying what other countries chose isn’t going to work,” says the representative of an international energy company, now laying down roots in western India. Having worked in the Indian energy space for over two years, this official claims that the government wants to adopt the latest tech, without first ensuring that it’s a fit for the Indian EVs.
The Indian Institute of Technology in Madras (IIT-M) has also been batting for NMCs. But like the India Energy Storage Alliance (IESA) have recommended that the draft plan looks beyond them, to the other 15-16 types of chemistries available.