China-weary Indian carmakers seek out other lithium-ion suppliers

New Delhi: India’s top carmakers are seeking alternative sources for lithium-ion cells that go into electric vehicle batteries as they seek to secure supply to counter China’s unpredictable curbs.Mahindra and Mahindra Ltd, the country’s second-largest carmaker, has begun talks with Germany’s Volkswagen Group, which has a lithium-ion cell subsidiary PowerCo, for future supply, the company said at Kotak Institutional Equities’ Annual Investor Conference last week.While Tata Motors Passenger Vehicles Ltd will depend on its group firm Agratas, Hyundai Motor India Ltd has inked a partnership with Exide Industries Ltd to procure locally made cells from the gigafactory under construction in Bengaluru.Lithium-ion batteries account for more than a third of an EV’s cost. Diversifying cell supply is important after China imposed restrictions on the export of rare-earth magnets, another critical component used in building motors.

China is also reducing tax incentives on exports of lithium-ion cells from 9% to 6% from 1 April, and eventually phasing it out over the year, which is expected to drive up prices.Indian automobile companies import battery cells from China, Japan and South Korea. Major suppliers include BYD, CATL, Eve, LG and Panasonic, with more than three-fourths of it coming from China.Diversifying lithium-ion supply chains away from China is a structural rebalancing of risk by automakers, said Harshvardhan Sharma, group head of automotive technology & innovation at Nomura Research Institute Consulting & Solutions India.“Over the next three to five years, success will depend on execution discipline, yield management, chemistry selection aligned to vehicle segments, and sustained capital commitment,” Sharma said.