Bringing Down Battery Cost: PLI for Battery Recycling Can Make EVs Cheaper

The government recieved 10 bids for PLI Scheme for Advanced Chemistry Cell (ACC) Battery Storage, totalling around 130 GWh. Along with the existing schemes for the automotive sector and electric vehicle manufacturing, this will help transition India towards a cleaner, more sustainable EV-based transportation system.

The number of bids indicates interest from domestic and global investors. PLI schemes have been instrumental in ramping up production up to 50 GWh battery cells by 2026 to meet the 2030 EV goals with the policy ground cleared by the Make in India initiative. 

The promotion of recycling of batteries makes obvious sense in cost as getting fresh batteries would impact the end-user and reduce the need for excessive mining of precious minerals. Battery recycling can play a significant role in energy transitioning in the cement, steel, glass, chemicals, and transport sectors.

It would help regenerate resources in “secondary materials” ecosystems and make repurposing end-of-life EV batteries viable and at a lower cost.

What The PLI Scheme Is For

The PLI for battery recycling set out to create a circular domestic supply of secondary materials, benefiting the ACC scheme by providing a stable supply of raw materials. Tax benefits and royalties are necessary to support mineral processing for lithium-ion batteries (LIB), the EV's costliest component.

Strengthening and boosting the battery supply chain is crucial for achieving long-term EV goals. Even if battery manufacturing has grown in the country, the EV component supplier market is much smaller than the EV OEM market.

Localisation in manufacturing various EV components, particularly motor controllers and LIBs, is essential to reduce import dependence and realise the benefits of EV adoption. By 2025, motor controllers should be at least 50 per cent localised, while LIBs should reach 60 per cent localisation by 2030.

Companies that make LIBs focus on cell-to-pack assembly and provide battery packs to EV OEMs and the storage market. Auto component incentives will be disbursed in the financial year 2024-25, and approved applicants can receive benefits for up to five consecutive financial years until March 31, 2028.

The automotive and renewable energy sectors, as well as electronic systems, have seen significant utilisation of funds under the PLI scheme. Together, they account for 54 per cent of the fund utilisation, highlighting the importance of incentives for local manufacturing.

The scheme has attracted proposed investments of Rs 67,690 crore, surpassing the target estimate of Rs 42,500 crore over five years. It focuses on Zero Emission Vehicles (ZEVs) and incentivises 18 per cent of eligible sales for electric vehicles and their components. The scheme will be active from FY 2022-23 to FY 2026-27, with disbursements occurring from FY 2023-24 to FY 2027-28. Additionally, applicants from Korea, the USA, Japan, France, Italy, the UK, and the Netherlands have been approved for the scheme.

Recently, the centre extended the PLI Scheme for the automotive sector by a year to allow applicants more time to meet eligibility provisions. Tata Motors, Ola Electric, and Mahindra & Mahindra are the only companies to meet the key Domestic Value Addition (DVA) criteria so far.

If a company falls short of the threshold for Determined Sales Value increase, they won't get incentives that year. But it can be taken forward the following year if it fulfils the threshold criteria based on 10 per cent year-on-year growth. This ensures fair competition among companies and protects those who front-load their investments from market uncertainties throughout the scheme tenure.

Challenges For Beneficiaries

Tata Motors and Mahindra & Mahindra are the only companies with localisation certifications from ARAI for electric powertrain products. Ola Electric has it for the E2W segment meeting the stringent requirement of 50 per cent DVA. Among the Champion OEM Scheme companies, 75 won PLI approval, including Cummins, Bosch, Denso, and Mitsubishi.

The release of funds on time is crucial to promote global companies to manufacture locally and meet DVA requirements. With only three Indian companies currently certified, it will be challenging to attract major global companies to India.

The companies have faced challenges in submitting necessary documentation, which requires endorsement by statutory auditors, due to the complexities in the application process, preventing timely eligibility for certifications.

To counter this, the Ministry of Heavy Industries combined compliance standards with FAME subsidies. If this comes to fruition, it will be a cohesive single-window clearance process that can boost the manufacturing of hybrid and electric vehicles.

Innovation Central

An estimated 72-81 GWh of waste batteries (about 447,000-517,000 tonnes) would reach recycling firms from 2022 to 2030, a CII report on Battery Manufacturing & its Ecosystem stated. In 2023, 1.47 million EVs and Hybrids were sold across two-wheelers, three-wheelers and four-wheelers.

The figures show a steady year-on-year (YoY) growth from 2020-2023 with an average of 45 per cent. The highest growth spurt came during the peak of the pandemic in 2021. With such sales figures, the need for battery recycling companies opens up. Car makers offer an approx 8-year warranty on EV battery packs and 3-5 years for mild and strong Hybrids. The need for innovation in this sector is essential to keep EV mobility sustainable. 

And efforts are afoot on that front. Lohum, the largest producer of sustainable battery raw materials through recycling, repurposing, and low-carbon refining, has trademarked technology which is said to recover 95 per cent of all Li-ion metal salts at 50 per cent lower carbon dioxide equivalent than mining. Another Indian company has a proprietary Net Zero Waste, Zero Emissions process, which recycles end-of-life LIBs to produce black mass, critical minerals and secondary products.

Gaps & Opportunities

A Toxic Links study has found 90 per cent of lead acid batteries reach the informal recycling sector or end up in landfills and garbage dumps. This is hazardous for humans as well as the environment. A more intense study of successful use cases in Japan and Germany, which have authorised battery recollection drives, is needed. Such regulations ensure OEMs are held accountable and also raise awareness among owners of EVs and Hybrid vehicles.

The draft regulations for battery recycling released in August 2022 was a significant development for the sector. The highlights of the policy introduces Extended Producer Responsibility and penalties for non-compliance, mandates a minimum percentage of recovery of materials from waste batteries and incentives for entrepreneurs.

For India to achieve its climate targets and energy storage goals, more needs to be done, such as: 

• Central-state government coordination to ensure battery collection for recycling.
• Certification of authorised agencies and capacity building to ensure all EV batteries are collected, stored, transported and recycled as per international regulations.
• Creating an ecosystem to educate EV owners, and potential EV buyers to return batteries to the manufacturers.

The Way Ahead

The PLI scheme is comprehensive, has foresight and aspires to maintain India’s energy independence by safeguarding critical minerals. With the rise in companies availing PLI incentives, 2024 marks the beginning of an exciting and competitive phase in India's battery manufacturing and recycling story.

With higher PLI utilisation by the automotive, renewable energy and electronics sectors, competitive start-ups have also entered the space. The next step is to streamline incentives, awareness drives by OEMs and initiatives to ensure global participation. 

The government needs to be wary of monopolisation in the sector by Indian entities or due to the lack of foreign participation. The future will be driven by technological advances and the energy ecosystem will play a major role.

India has the potential to be a major energy-exporting economy and schemes such as the PLI will be at the cusp of this transformation. Policymakers should not forget the greater challenge in the background, that of climate change. While keeping it in mind, the effort should be to push for long-term goals and opportunities to drive future narratives. 

(The author is a public policy and urban transportation enthusiast and specialist. Views expressed are personal)