The demand for electric vehicles (EVs) is rapidly increasing in India, driving a surge in the need for batteries and their components. With a focus on clean energy and the goal of achieving net-zero carbon emissions, the government is working on a new scheme to promote domestic production of battery components. This initiative aims to make the country self-reliant in battery manufacturing while creating attractive opportunities for investors.
Let’s explore what this new scheme is about and what it means for investors.
What’s Happening?
The Indian government is working on a new scheme to boost domestic manufacturing of battery components. The Ministry of Heavy Industries (MHI) is preparing a concept note for this scheme, which will focus on garnering support from policymakers. Key components of batteries include anodes, cathodes, electrolytes, copper, and aluminium foils. According to an industry report by the OMI Foundation, cathodes and anodes contribute 21% and 15%, respectively, to the cost of each battery unit.
The scheme also outlines a standard for domestic value addition (DVA). If a product doesn’t have at least 50% DVA, it won’t be considered a domestic product. This standard will promote the use of local components in battery manufacturing.
Government’s Previous Initiatives
In 2021, the government launched a Rs 18,100 crore production-linked incentive (PLI-ACC) scheme to promote domestic manufacturing of advanced chemistry cell (ACC) batteries. The goal was to encourage the production of 50 GWh of batteries. To date, incentives for 40 GWh of manufacturing capacity have been approved.
The first round of bidding for the PLI-ACC scheme was completed in March 2022, with Ola Cell Technologies securing the largest share of 20 GWh capacity. ACC Energy Storage (Rajesh Exports) and Reliance Industries (RIL) received approvals for 5 GWh each. In the 2024 rebidding, RIL received an incentive of Rs 3,620 crore for 10 GWh of production.
The Growing Demand for Electric Vehicles
India’s electric vehicle (EV) market is expanding rapidly. By December 29, 1.94 million units had been sold, reflecting a 26.5% YoY growth compared to 1.5 million units in 2023. As a result, EV penetration in the country has reached 7.46%, up from 6.39% in 2023.
Electric vehicles are being rapidly adopted in India as EV sales have nearly doubled in the past two years.
In line with this, the government recently launched the PM E-Drive scheme, a significant step to promote electric mobility. With a budget of Rs 10,900 crore, the scheme will be implemented until March 31, 2026.
What Does This Mean for Investors?
The government’s initiatives to support battery component manufacturing can present significant opportunities for investors. As the EV industry continues to grow, the potential for investment in the battery component production sector is set to rise.
This will not only strengthen the industry but also offer investors stable, long-term returns. Therefore, now is the time to track companies that could leverage these schemes to achieve rapid growth in the EV sector.
What’s Next?
The Indian government has announced the Viability Gap Funding (VGF) scheme to promote Battery Energy Storage Systems (BESS). Under this scheme, Rs 3,760 crore in budgetary support will be provided to develop 4 GWh of energy storage capacity by 2030-31. However, this scheme is yet to be implemented.
Moreover, the industry is seeking additional incentives from the government for components that are challenging to manufacture. Strengthening the battery storage supply chain could play a crucial role in increasing energy storage capacity in India and accelerating the adoption of clean energy solutions.
*The companies mentioned in the article are for information purposes only. This is not an investment advice.
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