The India lithium-ion battery market has experienced remarkable growth in recent years. Some of the primary drivers are favourable government policies and initiatives, increasing demand from electric vehicles (EVs), and the consumer electronics sector. The Indian government has implemented favourable policies and incentives to promote EV adoption, creating a conducive environment for the lithium-ion battery market. Additionally, the push for renewable energy integration and grid stabilization has further boosted the demand for battery storage solutions, including lithium-ion batteries.

However, the lithium ion battery market in India also faces certain restraints. One significant challenge is the high lithium-ion battery prices, making EVs and energy storage systems comparatively expensive. Supply chain constraints, particularly for raw materials like lithium and cobalt, also pose a challenge. Furthermore, the industry also faces issues related to li-ion battery safety, recycling, and environmental impact.

Despite these challenges, the India lithium-ion battery market presents immense growth potential, driven by the government's support, increasing consumer awareness, and advancements in battery technology.

Drivers

Supportive Government Policies and Regulations

India has committed to reducing the greenhouse gas (GHG) emissions intensity of its gross domestic product (GDP) by 45% below 2005 levels by the year 2030.

Following the announcement of its emission reduction target, the government undertook new initiatives and policies to cut emissions, mainly from the energy and transportation sectors, to reach its target. As part of which the government is actively promoting the adoption of electric vehicles and renewable energy sources.

By 2030, India aims for EV sales penetration of 30% in private cars, 70% in commercial vehicles, 40% in buses, and 80% in two- and three-wheelers. Add to this that the Government of India also targets non-fossil energy capacity additions of 500 gigawatts (GW) by 2030. Both of which assert the demand for lithium-ion batteries.

To strengthen the battery value chain and promote local manufacturing of lithium batteries to meet the growing demand, the government has introduced policies to encourage local manufacturing of lithium-ion cells. For instance, the Indian government doubled the import duty on lithium-ion cells and removed the customs duty on the import of capital goods and machinery used in the manufacturing of lithium-ion cells.

The government is also providing incentives for the production of lithium batteries. For example, the ACC (advanced chemistry cells) PLI scheme is part of the government's efforts to make India a global hub for the manufacturing of advanced batteries.

The PLI scheme will provide financial assistance to companies that set up manufacturing plants for ACCs in India. The incentive will be based on the production volume of ACCs, with a maximum incentive of INR 40,000 per kilowatt-hour (kWh). The scheme is expected to attract investments of up to INR 18,100 crore (USD 2.3 billion) and create over 10,000 jobs in the ACC manufacturing sector.

The Indian government's support for the lithium ion battery manufacturing industry is a major step towards making India a global leader in this sector. Following the recent discoveries of lithium reserves in India, the industry is expected to grow rapidly in the coming years, and India is well-positioned to capture a significant share of this market.

Segment Analysis

The automotive sector is one of the largest and fastest-growing segments of the lithium ion battery market in India. The growth of this segment is being driven by the increasing adoption of electric vehicles (EVs) in the country. The country has set itself a target of 30% electric vehicle sales by 2030, due to which the government is actively promoting the adoption of electric vehicles, which in turn is expected to drive demand for lithium-ion batteries.

India's electric vehicle (EV) market has shown impressive growth in vehicle sales over the past year (2022). The 999,849 EVs sold in 2022 represent a significant 210% year-over-year increase over the 322,871 units sold in 2021. The two- and three-wheeler markets were responsible for the majority of the growth. As they are the main drivers of EV sales because they are cheaper than passenger electric cars or large commercial vehicles.