Whenever you look around the roads and streets these days it’s not hard to catch sight of cars and two wheelers with green number plates. The infrastructure powering this sustainable shift and even countless gadgets and automobiles depends on the battery industry. India's battery market is estimated to be at USD 16.77 billion by the end of this year and is projected to reach USD 27.70 billion in the next five years, registering a CAGR of over 10.56% during the forecast period. These lithium based power houses are the basis on which the modern economy is relying to propel its growth and investors must not miss out on it. With new geopolitical shifts in lithium supply chains, reducing dependence on China, new initiatives in India for manufacturing, the battery industry in India should be under the microscopic lens of investors as its abuzz with a lot of happenings.
Raw Materials
The heartbeat of India's batteries industry lies in the array of raw materials that fuel its growth. Lithium-ion batteries, the cornerstone of this sector, rely on essential components such as lithium, cobalt, nickel, and manganese. What's noteworthy is India's strategic push for indigenisation, aiming to produce these critical raw materials domestically. The news about new lithium reserves being found in the Jammu Kashmir region inspire hope in the minds of investors.
This environment not only fosters self-sufficiency but also mitigates the impact of global supply chain disruptions like the Russia Ukraine war and geopolitical tensions with China. This aligns with the nation's broader goals of economic resilience and sustainability.
The cost of raw material of Lithium has also continued its month long decline in November, bringing its total drop for the year to 75%. The decline is expected to persist for the electric-vehicle battery metal. Chinese prices for lithium carbonate dropped 2.3% on Thursday, marking a 20% decrease this month. Spodumene, the lithium-bearing rock mined in Australia, has more than halved in 2023. A supply glut, following a surge in prices in previous years, has led to the decline. Forecasts suggest the global lithium market won't return to a deficit until 2028. Elevated interest rates and uncertainty over global EV demand are contributing factors. Some producers are scaling back operations due to falling prices, with SQM warning of a potential continued downward trend for the rest of the year. This bodes well for the batteries industry as the costs of raw materials drop thus increasing the spread between production costs and sales.
Moreover, the emphasis on responsible sourcing of these materials reflects a commitment to ethical and sustainable practices. Investors keen on environmentally conscious ventures can find solace in the industry's efforts to ensure that the supply chain aligns with global standards of environmental and social responsibility.
Applications
Beyond the conventional scope of batteries powering consumer electronics, the applications of these energy storage devices are expanding rapidly. At the forefront is the booming electric vehicle (EV) industry, a focal point of India's commitment to green mobility. The demand for batteries to power EVs is on an upward trajectory, driven by both governmental policies and an increasing awareness of environmental sustainability. Furthermore, as industries embrace renewable energy sources, batteries play a pivotal role in efficient energy storage, catering to the needs of grid-scale and off-grid applications.
In the context of electric vehicles, the government's ambitious goals are a key driver. Initiatives like the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme are instrumental in incentivising the production and adoption of EVs, consequently boosting the demand for batteries. This concerted effort aligns with global trends, positioning India as a major player in the electric mobility revolution.
Industry Overview
Zooming out for a panoramic view, the batteries industry in India paints a picture of resilience and growth. Technological advancements and strategic policy interventions, are steering the industry towards new horizons. Major manufacturers are capitalising on these trends, expanding production capacities, and attracting both domestic and international investments.
Collaborations between industry players and research institutions are gaining prominence, fostering an environment of innovation. The establishment of research and development centres and incubation hubs demonstrates a commitment to staying at the forefront of technological advancements. This collaborative spirit not only enhances the industry's competitiveness but also opens avenues for investors looking to align with cutting-edge advancements.
Government Impetus
The government's role in propelling the batteries industry forward cannot be overstated. Beyond FAME, various other initiatives are contributing to a conducive ecosystem. The National Mission on Transformative Mobility and Battery Storage is a comprehensive strategy aimed at promoting clean, connected, shared, and sustainable mobility initiatives. It focuses on creating infrastructure, promoting research and development, and fostering domestic manufacturing of batteries and electric vehicles.
Schemes such as 'Phased Manufacturing Program' encourage the domestic production of components, including batteries, fortifying the industry's self-reliance. The recent announcement of the Production-Linked Incentive (PLI) scheme for the advanced chemistry cell (ACC) battery storage manufacturing further underscores the government's commitment.
As per a CII report, demand for advanced chemistry cell (ACC) batteries in India is set to surge at a remarkable 50% CAGR, increasing from 20 GWh in 2022 to an estimated 220 GWh by 2030. This growth is attributed to a thriving local battery manufacturing industry and a robust supply chain. The report indicates that India is poised to localise a significant portion of the entire value chain, from material processing to pack assembly and integration.
In another news, India is gearing up to launch a bidding process for an Rs 8,000 crore ($960 million) incentive scheme dedicated to electric vehicle (EV) battery production. Successful bidders will be required to establish cutting-edge chemistry battery plants with a combined capacity of 20 gigawatt-hours. Notable companies expressing interest include LG Energy Solution, Mahindra & Mahindra, Amara Raja Energy & Mobility, Exide Industries, and Larsen & Toubro. Incentives will be granted over a five-year period based on local battery sales. The move aligns with India's broader goal of promoting cleaner transportation and is part of a $3.1 billion EV incentive program launched in 2021.
Challenges
The batteries industry grapples with multifaceted challenges that demand strategic solutions. Supply chain disruptions, volatile raw material prices, and the need for substantial investments in research and development are key obstacles. While there is a growing emphasis on indigenisation, the industry faces stiff competition from global players, necessitating a delicate balancing act to establish a strong domestic foothold.
Investors should be cognisant of these challenges, understanding that the industry's growth may encounter occasional roadblocks. It underscores the importance of a nuanced investment strategy free of cognitive biases and accompanied with robust diversification that factors in the dynamic nature of the global market and the industry's response to evolving challenges.
Prospects
Amid challenges, the future of India's batteries industry gleams with promise. The increasing adoption of electric vehicles stands as a testament to the sector's potential. The government's commitment to renewable energy further catalyses this shift. Investments in research and development are crucial, and strategic partnerships both within and beyond borders are expected to drive innovation, making the industry more resilient and competitive globally.
Here are some of the major players in the batteries industries that you can look into:
Company Name | Market Cap | P/E Ratio | Last Traded Price |
Exide Industries Ltd | ₹ 23,928 Cr. | 27.5 | ₹ 282 |
Amara Raja Batteries Limited | ₹ 11,593 Cr. | 14.5 | ₹ 679 |
HBL Power Systems Ltd | ₹ 9,517 Cr. | 53.2 | ₹ 343 |
Eveready Industries India Ltd | ₹ 2,499 Cr. | 60.4 | ₹ 344 |
High Energy Batteries (India) Ltd | ₹ 516 Cr. | 22.0 | ₹ 575 |
Indo National Ltd | ₹ 507 Cr. | - | ₹ 676 |
Panasonic Energy India Company Ltd | ₹ 288 Cr. | - | ₹ 385 |
Standard Batteries Ltd | ₹ 20.6 Cr. | - | ₹ 39.8 |
The Gist
In conclusion, India's batteries industry is not merely a sector; it is a pivotal player in the nation's quest for a sustainable and energy-efficient future. With an impressive ecosystem encompassing crucial raw materials, diverse applications, supportive government policies, and an increasing emphasis on research and development, the industry presents an array of investing opportunities for investors seeking long-term growth and impact. As the sector navigates challenges and leverages opportunities, investors have a unique chance to contribute to India's green revolution and be part of an industry poised for unparalleled growth. The batteries industry isn't just about energy storage; it's a powerhouse driving India towards a greener and more sustainable tomorrow.
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