Tesla shows interest in India's plans to build battery plants

In Indian government’s plan to develop large factories to manufacture lithium-ion batteries, Tesla and China’s Contemporary Amperex Technology Co. Ltd (CATL) are among the companies that have shown an initial interest with an investment of about RS 50,000 crore (US$ 6.95 billion).

The vigorous global interest comes within a strong promotion by the government to make India a global manufacturing hub for electric vehicles and their components. This comes as the country is trying to arrest its reputation as the world’s third-largest crude oil importer, saving on precious foreign exchange and monitoring pollution in its major cities.

Intended at securing India’s energy needs, the plan to set up these 50-gigawatt hour (GWh) factories which have got clearance by EFC, with the final tender anticipated to be awarded by February. Each gigawatt hour (1,000 megawatt hours) of battery capacity can power 1 million homes for an hour and around 30,000 electric cars.

Tesla is yet to launch its electric cars in India, with its chief executive Elon Musk putting the blame on the decision of “challenging government regulations" and “extremely high" import duties in India. This, in spite of transport minister Nitin Gadkari visiting the Palo Alto, California-based company in 2016 and recommending joint ventures between the electric carmaker and Indian automakers to produce eco-friendly vehicles. Prime Minister Narendra Modi also visited Tesla’s California facility in 2015.

The programme also intent to be technology-agnostic, that is it will be left to the market to regulate which technology is best matched for the country, depending on demand and price.

Cabinet clearance is expected by September. After that, the international tender will be floated. The EFC clearance had come, and the evaluation won’t take much time. The minimum ceiling for bidding is 5GWh, with the maximum allowed quantum of 20GWh.

As per the conservative scenario envisaged by NITI Aayog, India will need six such gigawatt-scale facilities (of 10GWh each) by 2025 and 12 by 2030. While this doesn’t include the export market potential, the base scenario envisions 11 such giga factories by 2025 and 24 by 2030.

Electric vehicles, such battery storages will supply to electricity grids, given the alternating nature of electricity from clean energy sources such as solar and wind. India has become one of the top renewable energy producers globally with an installed renewable energy capacity of about 80 gigawatts (GW), with plans to achieve 175GW by 2022 and 500GW by 2030, as part of its climate commitments.

Finance minister Ms Nirmala Sitharaman in her maiden budget announced in tax breaks for setting up mega-manufacturing plants for solar photovoltaic cells, lithium-ion storage batteries and solar electric charging infrastructure. Also, to boost private sector investment in this sector, the government is looking at tax incentives for manufacturers and a basic customs duty safeguard from 2021-2030 for making advanced chemistry cells and battery in India. It may suggest an output-linked subsidy on kilowatt hour of cells sold. India is also discovering a nearly US$1 billion concessional loan facility to be drawn from multilateral lenders to lift battery storage plans.

The Goods and Services Tax Council decided to cut taxes on electric vehicles and chargers from 1 August in order to encourage sales of electric vehicles. In the budget, Sitharaman announced tax reimbursements of up to Rs 1.5 lakh (US$ 2085) for customers on interest paid on loans to buy EVs, with a total exemption benefit of Rs 2.5 lakh (US$ 3475) over the entire loan period. She also announced customs duty exemption on lithium-ion cells, which will help lower the cost of lithium-ion batteries in India, as they are not produced locally.

In March, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles or FAME 2 scheme was introduced to expand commercial vehicle fleet with an outlay of Rs 10,000 crore (US$ 1.39 billion).

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.