Cheer for EV battery makers as machinery imports to cost less
3 min read . Updated: 02 Feb 2023, 12:39 AM IST
PremiumThe finance minister's decision to exempt capital goods and machinery needed to manufacture lithium-ion cells locally will lead to lower EV costs in the long term, as the move gives India's leading infrastructure players and EV battery manufacturers, who have made large long-term bets to develop a nascent and capital-intensive sector a fresh flourish
NEW DELHI : India's nascent electric vehicle ecosystem is set to receive a fresh boost as Finance Minister Nirmala Sitharaman's Budget encourages the development of a self-reliant EV sector, with a focus on localization of cells and removing roadblocks to the faster adoption of the eco-friendly technology. The FM's decision to exempt capital goods and machinery needed to manufacture lithium-ion cells locally will lead to lower EV costs in the long term, as the move gives India's leading infrastructure players and EV battery manufacturers, who have made large long-term bets to develop a nascent and capital-intensive sector a fresh flourish. India currently imports the vast majority of the equipment required to make lithium-ion cells, the mineral itself and ready-made cells from foreign markets at present, adding a significant import burden on the country.
The customs duty exemption will substantially lower capital costs for infrastructure players and cell manufacturers setting up giga-scale factories to make advanced chemistry cells locally, industry executives Mint spoke to said.
In her Budget speech for the fiscal year 2023-24, finance minister Sitharaman also said that the existing concessional rate of import duties on lithium-ion cells will also be extended for the duration for another year.
Some of the country's largest ACC battery manufacturers and original equipment makers, as well as prominent infrastructure players such as Reliance New Energy, Suzuki Motor Company, Amara Raja, Exide, Tata Chemicals, and start-ups such as Ola Electric and Log9 material are working on setting up local lithium-ion cell manufacturing capabilities in the country. The Budget announcement also complements the government's ₹18,000 crore production-linked incentive scheme (PLI) for advanced chemistry cells, with a capacity outlay of 50GWh.
"There has been a significant emphasis on green growth for the last few years in India and the continuity of the policy is definitely helping the industry gauge the direction of the government and plan accordingly. The PLI scheme for ACC batteries, demand sops in the FAME-II scheme are all enabling policies. As an industry we are at a critical juncture where we are translating this policy into actual initiatives on the ground. The big challenge is capital costs for setting up new cell manufacturing capacities is very high as not many of these goods needed are available in the country, and import costs are very high. Exempting this machinery from customs duty had been a long-standing industry ask and we are extremely happy that the government understood the capex burden on domestic infra makers is significant and took action", Vijayanand Samudrala, President New Energy Business, Amara Raja Batteries told Mint.
Amara Raja is investing ₹9,500 crore to build a 16 GWh factory in Telangana over the next 10 years.
"The customs duty exemption should lower our capex burden by 6-8% of the total project cost", Samudrala said.
At present, India relies heavily on Far-Eastern countries South Korea, China and Japan for the import of equipment critical to the manufacture of li-ion cells in the country. It also has some dependence on developed markets like the United States and Europe for the import of some machinery.
"There is an anticipation that we will build nearly 100GWh of domestic capacity by 2030, which will need $7-8 billion. A majority of the key process equipment will have to be imported -- assuming 75% of the equipment value will be imported, we are looking at $6 billion worth of capital goods imports. we are talking about 6 bn imported capital goods. In India, our capacity for making capital goods is limited in many segments, including electronics and advanced auto components, where even established OEMs have to import capital equipment. Hopefully in the next five years we will have more options", Samudrala told Mint.
Japan's Suzuki Motor Company has also committed ₹7,300 to set up a factory for making batteries for EVs in Gujarat, where it will also undertake cell manufacturing.
"In electrification, though the finer details are awaited, the budget has made a judicious and pointed intervention to encourage local manufacturing of lithium ion cells and batteries by facilitating machinery/capital equipment import. There are many plants in India assembling batteries by using imported cells. Through the Toshiba-Denso-Suzuki JV, we have India’s first Lithium ion cell manufacturing plant doing production and export. Suzuki Motor Gujarat is commissioning another battery plant with cell level localization in Gujarat with an investment of ₹7300 crores. Cell manufacturing needs precision equipment and very tight environment control. Easy import of machinery and capital equipment will be helpful." Rahul Bharti, Executive Director Corporate affairs told Mint.
"The emphasis on increased infrastructure spends and support for lithium-ion battery manufacturing will be a great multiplier for industry overall", Sudarshan Venu, managing director, TVS Motor Company, which is currently the country's second-largest electric two-wheeler maker, said.
