Rising Demand for EVs and Energy Storage Fuels Li-ion Battery Surge

The increasing need for electric vehicles (EVs) and grid-scale energy storage is fueling a swift surge in the demand for sophisticated batteries such as Li-ion. To facilitate this transition, the Indian Government has implemented initiatives like the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme and Viability Gap Funding (VGF) for Battery Energy Storage Systems (BESS).

These policies seek to enhance the affordability of EVs and energy storage systems, targeting a 30 per cent EV penetration rate by 2030; however, CareEdge Ratings predicts a more achievable penetration of 20 per cent, given the existing rate of EV adoption and infrastructure progress.

The decreasing price of Li-ion batteries, which fell from USD 780/kWh in 2013 to USD 139/kWh in 2023 as a result of technological improvements and economies of scale, is another reason driving this demand.

To achieve this, India is developing extensive integrated lithium-ion battery manufacturing plants, backed by the Advanced Chemistry Cell (ACC) Production Linked Incentive (PLI) initiative.

The government has designated 40 GWh for battery production capacity via this program, with another 10 GWh to be granted shortly. Numerous well-known battery producers and emerging firms are also establishing operations beyond the PLI framework, with these capacities anticipated to be operational gradually by FY27.