October 13, 2019 ☼ The Intersection ☼ technology ☼ geopolitics
While China has an advantage in lithium battery production, India could turn competitive with a couple of components
This is from The Intersection column that appears every other Monday in Mint.
It is hard to know how many members of the committees that decide various Nobel prizes have personal experience of the inventions they often indirectly honour. But I am sure every single member of the Royal Swedish Academy of Sciences, which selected John B. Goodenough, M. Stanley Whittingham and Akira Yoshino as this year’s Chemistry laureates, uses lithium-ion batteries. While the Academy gave in to a little hyperbole when it declared “they created a rechargeable world”, it was nevertheless on the mark in saying that “lithium-ion batteries have revolutionised our lives since they first entered the market in 1991. They have laid the foundation of a wireless, fossil fuel-free society, and are of the greatest benefit to humankind.”
As an engineer designing mobile communication devices in the mid-1990s, I recall struggling with the battery dilemma. Higher data rates and bigger display screens demanded more battery power, but the Nickel Metal Hydride (NiMH) batteries I was working with then were big, heavy and slow to charge. While Moore’s Law applied to microchips, which became faster, smaller and cheaper over time, battery performance would change more slowly. Our devices would be big, bulky and heavy. Slow charging cycles meant that we had to provide our mobile phones with an extra battery with an external charger, which would be left to charge while the device was being used. The lithium-ion battery dramatically changed the scene. By the time the industry began to adopt it, though, I was no longer in the business, but vividly recall my overjoyed former colleagues talking about lithium-ion technology as if it had liberated us from a foreign oppressor.
More recently, these batteries have been busy liberating the transportation industry. While batteries constituted half the total cost of an electric vehicle a few years ago, they now account for only a third. According to a [research note] (https://bloom.bg/2GkXJvO) published by BloombergNEF’s Nikolas Soulopoulos, falling battery costs will make certain types of electric cars cheaper than their internal combustion engine counterparts by 2022. Not quite Moore’s Law pace, but still pretty fast for a battery.
A combination of new sources of lithium supply, innovations in mining technology, manufacturing improvements, economies of scale and battery management systems are contributing to the declining costs of these batteries. Chinese companies dominate the lithium-ion battery industry, from extraction of the mineral to exports of cells and batteries. While not quite the Saudi Arabia of lithium—Australia and Chile are bigger producers—Chinese firms currently control almost half the global lithium production and 73% of the global cell [manufacturing capacity] (https://bit.ly/33libFu_; _bit.ly/2B0W6zN).
India imports lithium-ion cells from China, Taiwan and South Korea, and battery assembly capacity of 1 gigawatt hour (GWh), or about 0.3% of global capacity. According to CleanTechnica, India imported $1.23 billion worth of lithium-ion batteries in 2018-19, six times higher than in [2014-15] (https://bit.ly/2JD1VZl). Dependence on imports, and on China, has led the concerned Narendra Modi government to propose the setting up of [giga factories in India] (https://bit.ly/2B0WJt9). CleanTechnica estimates that India will need a minimum of 10GWh of cells by 2022 and 50GWh by 2025. In comparison, China is expected to have over 600GWh of annual battery production capacity by [2023] (https://bit.ly/2SRVyoa). Even if domestic capacity is created in India to meet these levels of domestic demand, it is unlikely to be price competitive vis-à-vis Chinese imports.
There are three components to lithium-ion batteries: the basic cell, the battery pack and the battery management system. A complete battery includes several cells in a pack controlled by a management system.
Getting into the cell game is risky even for investors with deep pockets. Amara Raja Batteries Ltd’s Jayadev Galla reflected the hesitation of Indian firms to invest in manufacturing capacity ahead of demand when he told a [World Economic Forum audience] (https://bit.ly/2B1b4WB) that the electric vehicle “ecosystem has to be in place first so that there is predictable and a growing demand for electric vehicles before we get into cell manufacturing.” The government too should not rush in to commit billions of dollars to a technology that could change quickly.
It may be more prudent for India to focus on the other two components. Battery packs are more resistant to changes in cell technology, and battery management systems can leverage India’s strengths in software. My colleague Saurabh Chandra, who is also co-founder of Ati Motors, a startup making autonomous commercial vehicles, argues that securing intellectual property in battery management systems and thermal management of batteries is a better strategy for India.
There are many more The Intersection columns here
Given that India lacks lithium reserves, we should consider “urban mining”—the extraction of minerals from waste—as a possibly strategic alternative, and not just for lithium. A recent market research report projects a recycled lithium-ion battery capacity of 23GWh worth a billion dollars by [2030] (https://bit.ly/2ozjK3J). With 2030 demand projected to be over 125GWh and the geopolitical risks of relying on China, lithium is one more reason to strengthen relations with Australia.
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