Inside India’s slow, costly push to build a battery supply chain

The pilot plant, established within the white walls of the Indian government’s International Advanced Research Centre for Powder Metallurgy and New Materials (ARCI) in 2023, has scaled up to produce 250kg a day of the critical mineral that constitutes a significant percentage of a battery cell’s chemistry today. The scientists at the research centre are Altmin’s technology partners, working towards achieving the ambitious goal of localizing the geopolitically critical battery supply chain from rival China.

Now, Altmin is moving towards industrial-scale cathode manufacturing with a 100,000-tonne capacity plant in Telangana. Last month, the company signed an agreement with the state-owned Singareni Collieries Co. Ltd (SCCL) to set up the country’s first lithium refinery. The refined lithium will feed into the manufacturing of cathode active materials.

“We started working on the technology a decade back at a laboratory scale with only a couple of scientists. The last few years we have worked on bringing down the costs, solving the teething problems faced with scaling the technology from lab scale to plant scale,” said R. Vijay, director at ARCI, an autonomous research and development (R&D) centre under the Department of Science and Technology.

Battery components are a critical midstream layer that sits after mining but before cell manufacturing and battery pack assembly. Apart from cathodes, other parts of the battery cell include graphite anodes, separators and electrolytes. The geopolitically sensitive segment of cell components has attracted startups and established firms alike with capacity scale-up plans. India is moving towards lithium-iron phosphate (LFP) batteries since they are less likely to overheat in hot weather and are cheaper than older chemistries in nickel and cobalt. Sodium-ion is another emerging chemistry.

Reliance Industries Ltd has announced plans to enter anode and cathode manufacturing by 2027-28, while Epsilon Advanced Materials has started making anodes and plans to venture into cathode manufacturing as well. Lithium-ion battery recycling startup Lohum Cleantech in Noida is now scaling up its nascent advanced materials business with plans to make lithium cell components at scale. Neogen Chemicals is growing its electrolytes business.

If these midstream players succeed, they could underpin India’s emerging electric vehicle (EV) and energy storage battery manufacturing ecosystem, led by companies such as Reliance, Exide Industries Ltd, Energy and Mobility Ltd, Ola Electric Mobility Ltd and Waaree Technologies Ltd. Their ambitions align closely with India’s broader goal of replicating, at least in part, China’s dominance in EV and energy-storage batteries. It is at the heart of India’s push for energy security.

According to Observer Research Foundation, a think tank, the planned investments in battery and cell manufacturing in India total ₹43,300 crore. This excludes planned investments in cell component manufacturing by firms including Altmin, Epsilon and Neogen.

As Satyadeep Jain, an analyst from advisory firm Ambit, has argued that if India does not set up its own battery manufacturing ecosystem across upstream, midstream and downstream, it will remain a bystander, reliant on imports and losing out on both employment and current account benefits.

“There is an opportunity for India to also export midstream supplies to the US as that country looks to diversify its supply sources away from China, at least till the time it sets up domestic capacities in midstream too,” said Jain.

David vs Goliath

Despite the rapid decrease in battery prices and continued innovation, the degree of concentration in battery supply chains within China has raised security concerns among governments across the world in recent years.

“Diversifying the production of batteries and their supply chain is a substantial undertaking and may require trade-offs. Any country interested in expanding output needs time and investment to bolster domestic manufacturing, build up its expertise and reduce production cost gaps relative to China,” said the International Energy Agency, a Paris-based intergovernmental organization.

But the challenge in replication is scale and economics. China has a major role at each stage of the global battery supply chain and dominates the interregional trade of minerals. According to Jefferies, China currently controls about 70% of global lithium processing, 95% of graphite processing and nearly 70% of synthetic graphite capacity. It also dominates battery components, accounting for over 90% of global cathode and anode manufacturing. Also, Chinese cell makers are pricing products close to raw-material and energy costs, supported by low financing costs and effectively squeezing margins for new entrants elsewhere.

“One is China’s ability to produce at a large scale, so they have economies of scale and economies of scope, which does make them the lowest possible cost player, even without the government subsidy. And then, there are government subsidies that have encouraged them to set up these capacities,” said Rajat Verma, founder and chief executive officer at Lohum. “The third bit—the dumping that they engage in—always has an indirect support of their government.”

This has made life difficult for players such as Altmin, which is still at a pre-revenue stage as cell manufacturers in India and elsewhere take their time to qualify their material and haggle over prices. The approval process of testing and qualifying an advanced material like cathode by cell manufacturers in India and elsewhere is about two to four years, versus just 27 days in China.

“Supply managers within cell companies tell us that first you set up the industry, and then we will see. But how do we set up the industry without assured clients? And they ask us to match Chinese prices! We are just starting, we don’t yet have full control over the supply chain and input materials,” said Anjani Sri Mourya Sunkavalli, founder and managing director of Altmin.

Selected beneficiaries, including Ola Cell Technologies and Reliance New Energy, under the National Programme on Advanced Chemistry Cell (ACC) Battery Storage, have to ensure a domestic value addition of at least 25% and raise it to 60% within five years. This has so far been challenging for the players. Industry analysts believe a scheme that helps the companies with more upfront cash to set up factories, rather than incentives linked to production, would be more helpful.

Offtake agreements, which are commitments from buyers to purchase the product, are an essential financing tool for operationalizing a large-scale project. This has created gaps in integrating the battery supply chain in India, despite some local players’ increasing presence in making advanced battery materials. Currently, all key battery cell components can be imported from China at zero duties. Cell manufacturers in India often are contractually mandated to buy cell components from Chinese firms with which they partner for technology, according to industry participants.

Currently, all key battery cell components can be imported from China at zero duties. Cell manufacturers in India often are contractually mandated to buy cell components from Chinese firms with which they partner for technology.

According to the think tank International Institute for Sustainable Development (IISD), India needs to pursue backward integration with the high-value cell components segment as well as equipment manufacturing to truly capture value across the battery supply chain.

Firms like battery materials manufacturer Epsilon Advanced Materials are focusing on the export market to begin with until the demand from local cell manufacturers increases. Epsilon already makes graphite anode, another critical cell component, for Japanese, Korean, American and European customers, and is expanding production with an eye on foreign companies ready to pay a premium to have a supplier outside of China.

The company also plans to set up a large commercial-scale cathode plant. It bought Johnson Matthey’s LFP cathode active material technology centre in Moosburg, Germany, in 2024.

“The Indian market is not ready to commit. These projects are not easy to finance because banks don’t understand them today. When we are discussing contracts for the outside market, these are 6-10 year contracts. In India, they just want to compare prices,” Vikram Handa, managing director at Epsilon, said.

Most of the Epsilon’s cathode production in India will go to an automotive customer in the US, but Handa has set aside 15-20% capacity for Indian clients in his factories and expects the demand to come through in three-four years. Right now, though, Indian cell manufacturers remain price sensitive and sometimes lack cell testing capability to qualify advanced materials.

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But for cell manufacturers in India, cost efficiency as well as long-term visibility of critical cell components matter for competitiveness, even when they seek to hedge against geopolitical uncertainty with China.

Amara Raja is setting up a 16GWh gigafactory for cell manufacturing in Telangana. The cell components for the first phase that comes online in the current fiscal year will be sourced mainly from China.

“The material supply chain is the bigger challenge. You got to have a secure supply chain with a clear visibility of where the material is going to come from over a longer period of time and it should be cost-efficient for you to be competitive in the marketplace,” said Vijayanand Samudrala, president, new energy, Amara Raja Energy and Mobility.

Samudrala believes that in the short and medium term, China would be a very competitive choice to go for, while the company, in parallel, works on a Plan B if things were to go wrong.

“Plan B may not be the very optimum choice, but it is more for security reasons. We carefully look at what is evolving in India and outside China. Any backup plan would be more difficult and more expensive,” he said.

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Risk of Chinese reliance

A significant number of Indian companies have entered into technology transfer agreements with established battery manufacturers, particularly from China. Exide Energy Solutions, for instance, has signed a technology transfer agreement with SVOLT, a China-based high-tech lithium-ion battery producer. Under this arrangement, Exide will have the irrevocable right to use and commercialize SVOLT’s technology and know-how for battery manufacturing. Amara Raja has entered into a similar agreement with Gotion InoBat Batteries, a unit of China-based Gotion High Tech Company, to access its technology.

“Agreements such as these enable Indian manufacturers to benefit from their partner’s technology, expertise in setting up manufacturing units, operational scale, and, most importantly, integration into their partner’s global supply chain networks. For India, however, its heavy reliance on Chinese technology carries strategic and geopolitical risks,” said Anika Chhillar, an analyst with the Observer Research Foundation, a think tank.

The Chinese government has already started to control the exports of various battery materials and lithium-ion technology. In October last year, China announced major export controls on lithium-ion battery supply chains. The new controls expand on previous measures and cover a much broader range of battery materials, technologies and equipment across multiple stages of the supply chain. They now include battery cells and packs for high-performance applications, cathode precursors, an expanded scope of anode materials, a broader coverage of LFP cathode materials, and battery and material production equipment and technologies.

“Focus on sahi daam (right price) is not how this supply chain is going to pan out. There is geopolitics and mineral security at play here,” said Altmin’s Mourya.

‘Focus on ‘sahi daam’ (right price) is not how this supply chain is going to pan out.’ — Anjani Sri Mourya

The Indian government controlled the imports of solar panels from China through various tariffs and non-tariff barriers, but has not yet imposed any such measures for battery and cell makers, given the lack of large local capacity. Solar panel assembly is a low-tech assembly job, while cell manufacturing and advanced battery components production are fairly technologically intensive. India remains an importer of battery cells at present, along with many of the cell components.

“There is already global overcapacity in the entire battery supply chain at present. In addition, India doesn’t have lithium reserves and doesn’t have R&D on batteries, where China has accumulated a wealth of process knowledge over time. But these headwinds shouldn’t deter India from onshoring the battery supply chain,” said Ambit’s Jain.

The lag

Across ARCI, the Indian Institute of Science, the Central Electrochemical Research Institute and various Indian Institute of Technology colleges, a lot of groundbreaking battery research work is on going, funded by the government and many private corporations, but to scale it from laboratory to industry is a different ball game and an expensive one.

“The lag with China can be overcome by more effort, resources and manpower added to the system. We are in the research scale but are lacking in the industry scale. That lag has to be minimized by big players’ R&D effort,” said Sagar Mitra, professor of the department of energy science and engineering, Indian Institute of Technology, Bombay.

India’s tech innovation, especially in deep tech, suffers from a critical lack of patient capital, defined as long-term funding for high-risk, long-gestation R&D, because traditional Indian venture capitalists and domestic institutions like insurance and pension funds prefer quick returns, unlike foreign investors, creating a funding gap for science-led breakthroughs despite immense talent.

“Risk capital does not exist in India. In India, scientists are struggling to raise patient capital,” said Epsilon’s Handa.

The success of the Indian battery supply chain to decouple from China without compromising on quality and scale will be critical for geopolitical derisking.

“While China and the US lead production of next-gen chemistries, India’s presence in lithium-ion, sodium-ion and flow technologies remains limited,” stated consulting firm Praxis Global Alliance in a recent report. “The next decade will define whether India becomes a global hub or remains a late-stage assembler in the battery supply chain.”