We recently published an article written by Maxson Lewis, the Managing Director of Magenta Power which caused quite a stir. He had stated that boycotting Chinese automotive imports is like destroying your house to kill the rat, but also mentioned the dichotomy of the world is beyond the point of removing China out of the equation when it comes to the manufacturing of Lithium-ion batteries. We caught up with him to dig in deeper into his mind to get a better understanding for all that why china has such a monopoly in the battery manufacturing, what path India needs to take to combat the situation and where the Indian government should actually set its focus to achieve that.
What is the main reason electric vehicle battery manufacturing is dominated by China? Why does China have such a huge monopoly?
The Key to Electric Cars Is Batteries and the key to batteries is economies of scale and raw material security. In China, the scale of operations was supported by state intervention benefitting Chinese manufacturers. One of the main methods of how this is done in China’s certification scheme. Since 2015, the Ministry of Industry and Information Technology has cleared 57 general EV battery manufacturers for business in China. In 2017, only six out of 98 battery and battery component companies operating in China were foreign. This helped them reach economies of scale faster and an entirely circular economy of EV batteries was built around this.
The second is the government-supported security around base raw material especially Lithium. Chile, Australia and Argentina have larger lithium reserves than China but China controls these reserves directly or indirectly and hence a stranglehold on lithium production. To give a comparison, in 2018, Chinese lithium production was 8,000 metric tons, third among all countries and nearly ten times U.S. lithium production.
While the low cost of labour in China was also one of the aspects, but that was not unique to batteries.
When it comes to minerals required for batteries, especially lithium-ion batteries, what are the main hurdles for India to manufacture them indigenously? Do you feel that we can find enough lithium on home soil that can supply the demand for EV manufacturing?
The main hurdle to manufacturing the lithium-ion batteries indigenously is the same two aspects of scale and raw material in which we lag considerably. About finding Lithium at home in India, I am not sure if there has been a concerted effort by the ministries in this direction, Last year we heard the news about estimated lithium total reserves of available Li2O as about 30,300 tonnes over an area of 0.5 km x 5 km found near Mandya in Karnataka district. But in effect, this translates to just around 14,100 tonnes in net reserves. To put this in perspective, estimated reserves in Chile are 8.6 million tonnes, 2.8 million tonnes in Australia, 1.7 million tonnes in Argentina. The find of 14,100 tonnes in Mandya pales in comparison with global reserves.
While we hope and pray to find more reserves in India, the discussion should not be around non-availability in India, there is too much focus on lithium and its non-availability. Like China, we need to secure it in the international market. But more important is to focus on what capability and capacities we can build in India around EV.
As the next generation of battery technologies could be solid-state batteries, do you think it would be wiser to work towards the development of those technologies directly? Start the innovation with research and development to get ahead of the curve? Is this possible? Is it already in the works?
Solid-State batteries for EV is indeed a hot topic and companies like Samsung did sound the bell on some breakthroughs. It is promising research but typically technologies like these take years if not decades to reach production capabilities. Yes, India could jump an entire technology cycle by moving straight to solid-state technologies and there are a few companies we are partnering with who are working in this space in India. But again this should not be seen as a short term outcome but a long term investment. Unfortunately, the investment ecosystem in India does not support long term technology development and hence it should be a case of too less, too little, too late.
4. In what ways can the government support the development of EVs? Currently, with EVs and the technology being so expensive, EVs cannot be adopted by the common man (leaving 25kmph scooters aside). Without bringing down the cost, generating demand will most likely be difficult. Should the Indian government try and help incentivise R&D for the technology or subsidising the cost for the end product to the consumer is the right way to go for India?
India lost the solar race to the silicon wafer manufacturing capacities in China and we are still trying to play catch up. The first step is to accept that hard lesson and fully appreciate that EV is the future. This requires a social, economic commitment coming in from private and government entities. Today, there are companies in India who have started on the path of EV, but the government approach of subsidising the cost of the end product is a very short term view. This creates barriers to budding technologists who lose out on the red tape. Subsidy creates artificial barriers.
Instead, subsidise technology development through access to R&D labs and facilities. A simple example is the enormous laboratories available with government entities in India which are not only in limited use but also closed out to individuals and start-ups. Open them to tech development in EV. There are a huge number of EV tech developers struggling in the bye lanes of rural India who need access to such facilities. We at Magenta ChargeGrid are a good example of the pain and trouble it took to develop a charging solution fully made in India.
In the case of a budding technology like EV, the government should not throw money in the form of subsidies and close opportunities, rather open the doors to tech labs in the true spirit.
Coming to the high cost of EV which is a barrier to large scale adoption of EV, this is a natural trend in any new technology. Batteries and hence EVs will follow a cost reduction of an average 15% year on year for the next 7 years (call it Maxson’s law if you will). The super inflection in favour of EV will happen when the price point reaches $110 per kWh assuming steady prices of fossil fuel. If you are aware the batteries were at $1160 per kWh in 2010 and reduced to $176 per kWh in 2018 and dropped to $156/kWh in 2019.
But the punch line is that even today an EV is positive as far as TCO is concerned if the utilisation factor is high.
In your last article, you stated “It is possible to move batteries outside of China, but it is difficult to move China out of the batteries” What will it take to remove china out of the equation entirely?
That quote of mine from the last article is just short of becoming a hashtag in the EV industry. Unfortunately, that is true and will continue to be true for some time. My suggestion is not to attempt to remove China out of the equation but build a larger formula where China becomes a small part of the equation steadily. Look beyond batteries, look at telematics, look at motors and motor controllers, to begin with.
The only way to remove China out of any global supply equation be it batteries or even pharma chemicals is a political solution which is beyond me.
What are your thoughts on Nitin Gadkari’s recent comments on India to become an EV manufacturing hub?
The honourable Minister has been one of the most active proponents of EV and clean technologies and that is very appreciable. However, EV and EV manufacturing is a technology-intensive industry and is a long term game and we need a visionary like him to keep pushing.
For India to become an EV manufacturing hub, a lot of ground-level issues need to be resolved. While some of them are EV specific (battery, technology, R&D) which I have addressed in some of the earlier questions. Setting up a core manufacturing hub needs an ecosystem view and ‘greasing’ some of the bottlenecks — regulatory permissions and approvals, taxation issues, supply chain challenges. It is good to note that India is not competing with China on this as of now. Our competition is other south-east Asian countries who are viewing this opportunity with bated breath and are jumping on the EV opportunity with a lot clearer intent than we are doing.
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