Aiming for 30% EV penetration by 2030, India is currently at a crucial juncture. It needs to rapidly ramp up lithium supply to ensure its EV journey does not lose momentum soon after a great start
India’s electric vehicle journey has been very encouraging so far. According to an EV Dashboard run by Clean Mobility Shift, 3.2 million EVs have been sold in India since 2018. Out of that, 2.12 million were sold in the last two years, suggesting a spurt in adoption of the new technology.
The latest Economic Survey has predicted the domestic EV market will grow at a CAGR of 49% between 2022 and 2030 and by the end of this decade, India will see 1 crore EV units in annual sales – a massive increase from now. This offers a great economic opportunity as, according to the Survey, the EV industry will create 50 million direct and indirect jobs by 2030. However, these ambitions depend on ensuring this rapidly evolving sector is protected from unexpected supply shocks.
The production of EVs depends highly on the availability of lithium, a key mineral used in lithium-ion battery technologies. While the mineral is set to play a key role in driving EVs over the next decade, the lithium deposits are concentrated in a handful of countries. How critical is lithium can be sensed from the fact that eight major economies – the US, EU, Japan, Canada, Australia, China, South Korea and India – have included it in their critical minerals list. India designated it a “critical” mineral along with 29 others in July this year.
Figure 1 shows India’s li-ion imports have been growing rapidly since FY 2018. Image via IISD report titled Lithium-Sourcing Roadmap for India.
The IEA forecasts the demand for lithium will see the fastest growth, more than 17 times between 2022 and 2045 under the IEA’s net-zero scenario. India has made a commitment to reach net-zero by 2070 and set ambitious near-term targets of deploying 500 GW of non-fossil electric power capacity by 2030. It has also set an aim to achieve a 30% EV sales share by 2030.
Meeting these targets requires rapidly increasing the supply of critical minerals, such as lithium, but the country is largely reliant on imports. In February this year, it found a big lithium deposit in Jammu and Kashmir with estimated reserves of 5.9 million tonnes. Whether that would be enough to address the current or future demand is not clear yet.
How Can India Ensure Uninterrupted Lithium Supply?
Major economies have long understood the importance of lithium in maintaining their industrial competitiveness. They have taken steps to secure access to lithium resources through direct investments in overseas mines and long-term supply agreements, as well as setting up processing and refining capabilities. Indian companies, on the other hand, have left much to be desired in ensuring a seamless lithium battery supply chain. The domestic production and recycling of the mineral is expected to offset the demand only after 2030.
So what should be done now to ensure continuous supply of lithium?
A recent report by the International Institute for Sustainable Development (IISD) forecasts that overall lithium demand is likely to increase between 10 and 40 times from 2022 to 2030 under two different scenarios – Business as Usual and the Accelerated Deployment of Clean Energy Technologies. It says policymakers need to undertake urgent planning to secure lithium supplies through equity investments and offtake agreements in international producing mines. India can also leverage its growing geopolitical heft to establish international partnerships.
Figure 2 shows estimated annual lithium demand in India under the Accelerated Deployment scenario (in tons). Image via IISD report.
India has significant untapped potential resources of lithium, particularly in Karnataka, Rajasthan, and Jharkhand. The IISD report calls for boosting the government’s exploration budget and asks policymakers to consider a state-backed guarantee for firms engaged in critical minerals exploration, like Germany.
Currently, the top three lithium-producing countries control more than 90% of the world’s production. And 60% of global lithium-processing capacity is concentrated in China. This makes India vulnerable to supply shocks. The Indian government needs to quickly build processing and refining infrastructure to maximise the use of its potential domestic resources. India can learn from Chile, where the government has adopted a mining strategy that requires new lithium projects to be public–private partnerships in which the Chilean state will hold a majority share.
Figure 3 shows battery chemistries used in India in 2021
New Delhi can cultivate partnerships with Australia and Argentina, whose relatively openness to foreign direct investment in the mining industry makes them safer and stronger partners for India. The government should assist Indian state-owned enterprises or public sector undertakings, such as Khanij Bidesh Ltd (KABIL), in pursuing partnerships in the two countries. KABIL, founded in August 2019 to identify, acquire and process strategic minerals in overseas locations for commercial use, is a joint venture of National Aluminium Company (NALCO), Hindustan Copper Ltd (HCL) and Mineral Exploration Corporation Ltd (MECL).
India can also gain a foothold within mineral-rich economies by providing them financing and technical support for joint mineral exploration. Additionally, India can explore trilateral partnerships with Japan and South Korea, both experienced in mineral financing and exploration, to invest in mineral projects overseas.
Finally, there is a need to create a recycling infrastructure for lithium-ion batteries, which may eventually lower the demand for lithium imports in the near-term and buy India some time to establish itself vis-a-vis global and more powerful players.