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Will lithium discovery be a game changer in India’s EV adoption story?

by Tavaga Invest

The world is increasingly turning electrified. Electrification of cars is one prominent phenomenon. By 2040, over half of the cars on the roads are projected to be powered by electricity.

Batteries play a critical role in this transition, but a relatively new type of battery i.e. the lithium batteries will dominate in both personal electronics, as well as in transportation and heavy industrial applications.

India strikes White Gold

The Geological Survey of India discovered 5.9 million tonnes of inferred lithium reserves in the Reasi district of the Jammu region of very high quality with an estimated concentration of 550 ppm (parts per million) as opposed to 220 ppm found elsewhere. With this discovery alone, India now has the fifth-largest lithium reserves in the world, marginally lower than China and just ahead of the US. Lithium is often referred to as ‘white gold’ due to the increasing value of lithium batteries in manufacturing items like phones, laptops, and electric vehicles.

Why inferred?

The reserves found are called “inferred” as more levels of verification will be carried out to assess the grade and viability of the resource. A 1,600-tonne deposit was earlier found in Karnataka but was commercially unviable. GSI has taken up projects on lithium and associated elements discovery across India, this being the first success. 

Lithium discovery projects in India

Why is it a huge deal?

The importance of lithium is being widely felt and this discovery has definitely put India on the global map. India till now was completely dependent on imports for this shiny gray metal. This discovery may likely help the Indian government deliver on a recent promise to increase the number of private electric cars by 30% before 2030. India imported ₹173 crore worth of lithium and ₹8,811 crore worth of lithium ions in 2021 and the requirements will only go up. 

What’s so special about lithium?

Lithium is one of the lightest elements, and it has the strongest electrochemical potential of any element. This enables a lithium-based battery to pack a lot of energy storage in a small, light battery. As a result, lithium-ion batteries have become the battery of choice in many consumer electronics such as laptops and cell phones. Infact, the price of Lithium has shot up by 90% since COVID-19. 

China’s lion share

Despite Latin America holding the world’s largest Lithium reserves China is the largest producer of Li-ion batteries with 73% of the global capacity, followed by the USA which is home to about 12% of global capacity. Six of the 10 biggest EV battery producers are based in China—one of them, CATL, makes three out of every ten EV batteries globally. While companies like Tesla and OneCharge are trying very hard to find US suppliers, China’s cost advantage seems unbeatable. China controls at least two-thirds of the world’s lithium processing capacity, and this ensures its stranglehold on the battery market for years to come.

How does China produce so cheaply? 

The simple answer to this question is cheap labour which it has in abundance followed by the cost advantage in green tech like solar panels of which it is the largest producer worldwide. China also has a definite cost advantage since it holds Lithium reserves of its own and has seized the momentum in the market by signing preferential deals with lithium-rich nations and huge government investment in the complex steps between mining and manufacturing.

But the catch is…

While Lithium is a relatively abundant metal, viable reserves are rare and there’s an important piece missing between mining and manufacturing. Turning lithium ore into lithium carbonate or lithium hydroxide needed for batteries is an expensive and complex process and factories have long gestation periods. Impact of lithium mining and refining also has a huge environmental impact. 

India has initiated a battery production-linked incentive (PLI) scheme worth ₹18,100 crore for five years to set up battery cell manufacturing. The refining capability is still at a very nascent stage. China is way ahead and enjoys the first mover advantage. 

Also, the ecological effects of the mining activity need to be considered specifically in the wake of the Joshimath issue which reminded us about the need to respect the eco-sensitivity of the Himalayas. The deposits are after all located at the foothills of the Vaishno hills which is a heavily populated and religiously important area.

Our take

For India to achieve its EV Vision 2030, it needs to work on securing its lithium reserves at the earliest as the race to be the “li-ion king” is intense and the pressure on the world’s scarce lithium reserves keeps mounting. It currently imports 95% of its requirements from China and Hong Kong and just the PLI scheme and duty exemptions are not enough, a partnership between the government and private sectors is required to have a firm footing on the global map.

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