Localization of EV parts without production scalability may not help cut EV price, says President, Amara Raja – ET Auto

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Localization of EV parts without production scalability may not help cut EV price, says President, Amara Raja – ET Auto


One of the major issues with adoption of EVs is its high acquisition cost.

New Delhi: Electric vehicles (EVs) are considered to be the future of mobility, though certain stumbling blocks are keeping most people away from them. According to the Vahan data, EV sales rose by 82% in March 2023 YoY to 1.3 lakh units. In 2024, the overall EV sales are expected to slow down according to recent studies.

Several factors have collectively contributed to the change in consumer preference from ICE to EVs. Some of these factors include: increased availability of EV charging infrastructure, lower maintenance cost of EVs, new technology, etc.

The maintenance cost of EVs is less than that of ICE vehicles, though the cost of replacement of parts in EVs is higher. This increased cost is due to expensive components used like batteries, motors, and many more. Batteries in EVs which account for almost 50% of cost make them costlier than the conventional ICE vehicles. Thus to tone down the EV price, battery cost reduction is inevitable.

Indigenization a way to curb high EV prices

One of the major issues with adoption of EVs is its high acquisition cost. For example the base model of Tata Punch EV costs approximately INR 11 lakh whereas the base model of Tata Punch ICE costs INR 6.5 lakh. High acquisition cost limits the buyers to choose EVs over ICE.

However, EV price reduction is expected due to indigenization of its components. In recent times several OEMs have announced price cuts of their EVs. This decision to reduce price is largely driven by market dynamics and lower cost of battery cells. One of the key ingredients that gets into battery cells is the lithium carbonate, whose prices have come down significantly in the last six months.

Experts say the reason OEMs were able to do so is because of the localization of battery manufacturing. Experts are of the opinion that Government schemes like Production linked incentive scheme (PLI), and subsidies on manufactured EV components would further boost the indigenization of EV batteries in India.

According to Pankaj Sharma, co-founder of Log9 Materials, the three important factors that can help reduce the cost of batteries are scalability, supply chain, and long-term contracts. Log9 Materials is the first commercial lithium-ion cell manufacturer of India. It is planning to commercialize them by 2024-end, with a planned capacity of 1,000 vehicles a year in the beginning.

Government can provide a hand to startups and OEMs by providing land at subsidized rates to build gigafactories and by extending electricity connections at a more affordable rate.

“Improved material supply chain efficiency, and cell design can result in lower material consumption for a given performance. They are the key components to reduce the EV battery prices,” Vijayanand Samudrala, President, Amara Raja, said. He added that the conversion costs would improve with significant scale.

The calendar life of EV batteries depends on the chemistry and quality of the materials used to assemble the battery pack. Hence the pricing of EV batteries is dynamic and can range from INR 12k to 40k per kilowatt hour (KWH).

One aspect linked to higher prices of EV batteries is the lithium-ion cells and batteries import cost in India. Proactive steps by the government to produce EV batteries in India has helped in reducing import of key battery components thereby cutting down the import duties cost, shipment expenses etc. along with increasing employment in India.

Large-scale production allows for bulk purchasing of raw materials, initiating a domino effect that significantly lowers the cost of each individual lithium-ion cell. “This would bring economic efficiency in the market for lithium-ion cells which constitute almost 80% of the battery cost,” Sharma said.

Supply chain dynamics underscores the importance of selecting a chemistry cell based on the components availability. “The resilience and abundance of the supply chain are pivotal to ensuring stable input pricing. Opting for a chemistry with readily available components shields manufacturers from potential shortages, contributing to a more predictable and cost-effective production process.” he added.

However, Samudrala believes that indigenization won’t help the country at this stage as the manufacturing scalability is not fully achieved. He further explained that for India to gain efficiency in terms of scale and the supply chain will take some time. “We have to go beyond the threshold level to see the benefits of localization. I don’t think localization by itself is going to benefit, unless we get to that kind of threshold scale.”

Long-term contracts with battery cell producers can provide stability by determining the fixed price of lithium-ion cells. It will aid manufacturers to plan production efficiently, creating a harmonized environment for both cell manufacturers and battery companies.

The demands, needs and requirements of batteries in vehicles vary from OEM to OEM and vehicle to vehicle. Customisation of batteries can make them more effective and cost-efficient.

EV fires

The batteries which are the key ingredients of EVs, and hold a major portion of the electric vehicle price also brings another fear for its customers. Recent incidents of EV fires can be said to be another potential reason for slow adoption of EVs.

EV fires sometimes occur owing to the inappropriate chemistry of battery cells which clashes with the climatic conditions. EV fires can be caused due to multiple reasons. However, the most commonly observed cause is linked to EV battery fire. To minimize EV fire incidents, the Government of India has introduced AIS 156 certification for battery manufacturing companies. It sets certain standards for battery manufacturers which have to be followed. Only then a battery can be installed in a vehicle.

Log9 battery cells provide a solution to this as they have been tested in extreme temperature conditions as high as 180 degrees to make them more temperature-resilient and suitable for Indian conditions. “So our thesis on lithium-ion cells is to make them more temperature resilient and fast chargeable, while keeping safety as a central mantra in the design fields,” Sharma said.

Amara Raja, which has received AIS 156 certification last year by ARAI believes it will aid in the upliftment of minimum standards set for EV batteries. “It made sure that everybody is brought to that minimum acceptable standards related to the cell selection and the pack design. And hence, to a large extent, we see that the earlier risk of fires or incidences of fires have been reduced,” Samudrala added.

Log9 has received AIS 156 certification for its batteries, making them safer for use in vehicles. Adhering to the safety of the driver and its passengers, Log 9’s battery has an automated shut off system when it observes any imbalance in the battery pack.

These standards not only promote safety but also indirectly boost the localisation of batteries used in vehicles.

  • Published On Mar 27, 2024 at 12:53 PM IST

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