New Delhi: Suzuki Motor Corp., parent of India’s largest car maker Maruti Suzuki India Ltd, said on Friday that it will form a joint venture with two Japanese firms, Denso Corp. and Toshiba Corp., to produce lithium-ion batteries for electric vehicles in India.
The company will be established this year and will start production soon thereafter. The initial capital expenditure will be 20 billion Japanese yen (around $184 million).
The joint venture company will be led by Suzuki with a 50% share. Toshiba and Denso will have 40% and 10% share, respectively, Suzuki Motor said in a statement.
“The battery pack manufacturing joint venture by the three companies will realize stable supply of lithium-ion battery packs in India in the course of promoting sustainable cars in the country and will contribute to the Make in India initiative by the Indian government," the statement added.
The move will be crucial for the success of India’s electric vehicle pursuits as it will bring down the cost of batteries and prop up sales of electric vehicles at a time when vehicular pollution has come under severe scrutiny from the judiciary, government and non-governmental organizations.
Currently, lithium-ion batteries account for 50% of the cost of an electric vehicle, making them expensive as compared with traditional cars. They are mostly imported from China.
Pawan Goenka, managing director of Mahindra and Mahindra Ltd, a company that has been aggressive in the electric vehicle space in India, said that any venture that builds an ecosystem for electric vehicles in the country is “delightful".
“We would welcome such a move. We are doing our bit by building power trains and vehicles. Anybody who contributes to chargers and batteries... we will be very happy to see that as they will build the ecosystem for the country. If Suzuki aims to bring down battery costs, that’s very delightful," Goenka said.
In the Indian automotive market, where compact cars are the principal models, the introduction of sustainable technology suitable for such affordable cars is required. Local manufacture of lithium-ion batteries will help India bring down its dependence on fossil fuel.
The country imports around 80% of the oil it consumes. India’s energy import bill is expected to double from around $150 billion to $300 billion by 2030.
India has an ambitious plan to sell six million electric vehicles by 2020. Currently, electric vehicle sales are low, at 22,000 units in the year ended 31 March 2016. They were at 16,000 units in 2014-15, according to lobby group Society of Manufacturers of Electric Vehicles.
Abdul Majeed, partner and national auto practice leader at PricewaterhouseCoopers, is optimistic that electric vehicles will soon become a hot trend in the country.
“Reality today is that regulators and environmentalists are so active that manufacturers have a very small window left. They can’t continue to be on a wait-and-watch mode," Majeed said, adding that the cost of batteries and charging infrastructure are two big challenges for the success of such vehicles.
“Once many vehicles come on the road, infrastructure will be created. But the bigger challenge is the battery cost—if that comes down, rest will follow," he added.